January 7, 2019 / 7:36 PM / 5 months ago

US STOCKS-Wall Street extends rally to second day on trade optimism

* Officials optimistic as China-U.S. trade talks resume

* Amazon leads consumer discretionary stocks

* PG&E shares slump on bankruptcy concerns

* Indexes up: Dow 0.65 pct, S&P 0.90 pct, Nasdaq 1.28 pct (Updates prices, adds quote from investor, details)

By Noel Randewich

Jan 7 (Reuters) - Amazon.com Inc and Microsoft Corp fueled a second straight session of gains on Wall Street on Monday, with the resumption of U.S.-China trade talks helping ease concerns that have pummeled the market in recent months.

The benchmark S&P 500’s advance added to a 3.4 percent surge on Friday, when strong U.S. jobs data eased worries over economic health and the Federal Reserve calmed nerves over interest rate hikes crimping growth.

Fears of a global slowdown have led to a sharp pullback in the markets over the last few months and in analysts’ estimates for corporate growth. But after hitting a 20-month low on Christmas Eve, the S&P has gained over 9 percent.

China has the “good faith” to work with the United States to resolve trade frictions, China’s foreign ministry said, while U.S. Commerce Secretary Wilbur Ross said he saw “a very good chance that we will get a reasonable settlement” as the two countries started their first face-to-face talks since a 90-day truce was agreed in December.

“The main thing is the administration’s implied progress on talks with China. That’s something that market sees as very important,” said Rick Meckler, partner at Cherry Lane Investments in New Vernon, New Jersey.

Ten of the 11 major S&P sectors rose. The biggest gain was logged by the consumer discretionary index, which jumped 2.64 percent, led by a 3.2 percent rise in Amazon. That made Amazon Wall Street’s most valuable company at $794 billion, eclipsing Microsoft’s market capitalization, which reached $789 billion following a 0.85 percent rise in its stock.

They and other high-profile technology and consumer stocks have rebounded after falling sharply in the final quarter of 2018.

Much of Monday’s upbeat sentiment was an extension of the previous session’s rally.

“The news on Friday was positive, and market participants are now acting more confident, and that is feeding on itself,” said Tom Martin, a portfolio manager at Globalt Investments in Atlanta.

The S&P energy index gained 1.5 percent as oil prices climbed about 3 percent on support from OPEC production cuts.

The Philadelphia Semiconductor index, which includes many companies dependent on China for revenue, jumped 2.36 percent.

At 2:13 pm ET, the Dow Jones Industrial Average was up 0.65 percent at 23,584.85 points, while the S&P 500 had gained 0.90 percent to 2,554.7.

The Nasdaq Composite added 1.28 percent to 6,825.16.

Utilities was the only sector down, dragged lower by PG&E Corp’s 22 percent slump. Reuters reported that the California utility is exploring filing for bankruptcy protection related to potential liabilities from wildfires.

With earnings season approaching, investors expect a slowdown in fourth-quarter profit growth and they will scrutinize forecasts for signs of further weakness.

Analysts now estimate S&P 500 companies to increase their fourth-quarter earnings per share by 15 percent. That compares to expectations of 20 percent growth three months ago, according to Refinitiv IBES data. The estimate for 2019 profit growth has fallen to about 7 percent from 10 percent.

Dollar Tree Inc jumped 5 percent after activist investor Starboard Value LP called on the retailer to sell its underperforming Family Dollar business and proposed replacing a majority of its board.

Loxo Oncology Inc surged 66 percent after Eli Lilly and Co said it would buy the cancer drug developer for about $8 billion.

Advancing issues outnumbered declining ones on the NYSE by a 4.27-to-1 ratio; on Nasdaq, a 3.17-to-1 ratio favored advancers.

The S&P 500 posted no new 52-week highs and no new lows; the Nasdaq Composite recorded 27 new highs and 12 new lows. (Reporting by Noel Randewich in San Francisco; additional reporting by Sruthi Shankar in Bengaluru; Editing by Lisa Shumaker)

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