Services industry data push Wall St higher; Italy faces gridlock

Strong economic data has trumped fears of a US-instigated global trade war, reversing a  four-session losing streak.

At the close of trading in New York, stocks on Wall Street were well into positive territory after a shaky start.

The Dow Jones Industrial Average rose 336.70 points, or 1.4%, to 24,874.76 after falling more than150 points immediately after the opening bell.

The S&P 500 wa up 1.1% to 2720.94, while the Nasdaq Composite gained 1.0% to 7330.70.

A potential global trade war, prompted by President Donald Trump's announcement of tariffs on imported steel and aluminium, remains a top talking point, though the administration is playing down the effects.

In the latest development, House Speaker Paul Ryan has warned the White House to drop the plan, while investors are being warned not to act too soon.

“The trade issues are part of the unknown,” says Mark Stoeckle, chief executive and senior portfolio manager of Adams Funds. “It’s hard to know with this administration as to whether it’s a negotiating posture or whether they’re going to stick with it.”

Meanwhile, wew data showing US service industries are continuing to expand at a strong pace helped investors to put aside their concerns.

“The [service] numbers were strong and suggest the economy is accelerating,” says Brad Neuman, client investment strategist for Alger.

The latest economic data, along with the strong fourth-quarter profit results “will drive a significant boost to the economy,” he adds.

While the Institute for Supply Management says its non-manufacturing index for February declined slightly, it still came in above economists’ expectations.

Caterpillar led the Dow higher, with the shares up 3.4%, while General Electric and Boeing rose 2.4% and 1.5% respectively.

US government bond prices slipped as stocks rebounded. The yield on the benchmark 10-year Treasury note settled at 2.879%, compared with 2.855% on Friday. 

Italy faces political gridlock
The Stoxx Europe 600 gained 1% after an inconclusive Italian election produced a surprisingly strong swing to non-mainstream and populist parties,

The caretaker centre-left government lost heavily to the Five Star Movement (32%), which will now be under pressure to join a coalition government though ideologically opposed.

The largest surprise was that in the centre-right grouping, Silvio Berlusconi's Forza Italia (14%) fell behind the Northern League (18%), which is in a position to lead the government with an overall tally of 37%.

However, that will depend on future negotoiations, with the populist M5S and the NL having a paper majority for a non-mainstream government that is largely hostile to the eurozone.

The centre-left, which ran the caretaker government, was squeezed to 23.5%, which is still large enough for at least one of many permutations that could make up a government.

Whatever the eventual outcome, the election has increased political instability in the eurozone’s third-largest economy, though it won’t hold back the wider economic upswing in Europe.

“This time the economic recovery in Europe and worldwide is much more resilient than in the past,” says Diego Franzin, head of equities at Amundi.

France’s CAC 40 rose 0.6%, Germany’s DAX increased 1.5% and the UK’s FTSE 100 gained 0.65%.