By Shreyashi Sanyal
March 1 () - The S&P 500 and the Dow Jones Industrial Average rose on Friday after three days of losses, lifted by optimism on trade and upbeat economic data from China, but gains were capped by downbeat U.S. manufacturing and consumer reports.
A private survey showed China's factory activity contracted for a third straight month in February but at a slower pace, indicating a marginal improvement in domestic demand as a flurry of policy stimulus kicked in from late last year.
"Certainly trade optimism is a driver for the markets right now. If China data continues to improve, that will start to put people's minds at ease about whether China is in recession," said Michael Antonelli, market strategist at Robert W. Baird in Milwaukee.
However, ISM data showed U.S. manufacturing activity for February dropped to its lowest since November 2016 and the University of Michigan survey showed consumer sentiment fell short of expectations in the month.
"At this point a little bit of a wet blanket is thrown over the rally, based on the U.S. economic data," Antonelli said.
The benchmark S&P 500 index has risen 11.5 percent this year, bolstered by progress in trade talks and the Federal Reserve's cautious stance on interest rates.
Of the 11 major S&P 500 sectors, six were higher. The healthcare sector rose 1.1 percent, providing the biggest boost, supported by gains in health insurers Cigna Corp and UnitedHealth Group.
The consumer discretionary sector rose 0.62 percent, lifted by a 6.2 percent jump in shares of Foot Locker.
The footwear retailer beat quarterly same-store sales estimates and helped drive a 1.8 percent gain in supplier Nike Inc shares.
At 12:58 p.m. ET the Dow Jones Industrial Average was up 71.36 points, or 0.28 percent, at 25,987.36, the S&P 500 was up 11.51 points, or 0.41 percent, at 2,796.00 and the Nasdaq Composite was up 43.60 points, or 0.58 percent, at 7,576.14.
After President Donald Trump delayed a deadline that would have triggered higher tariffs on Chinese imports, Bloomberg reported on Thursday afternoon that a summit between Trump and his Chinese counterpart Xi Jinping to sign a final trade deal could happen as soon as mid-March.
Among other stocks, Gap Inc surged 18.3 percent, the most on the S&P, after the company said it would separate its better-performing Old Navy brand and shutter about 230 stores of its struggling namesake apparel business.
Drug retailer Walgreens Boots Alliance Inc 6.4 percent, the most on the S&P. Brokerage Baird cut its price target.
A Commerce Department report showed inflation pressures remaining tame, which along with slowing domestic and global economic growth, gave more credence to the Federal Reserve's "patient" stance towards raising interest rates further this year.
Advancing issues outnumbered decliners by a 1.46-to-1 ratio on the NYSE and by a 1.67-to-1 ratio on the Nasdaq.
The S&P index recorded 46 new 52-week highs and no new low, while the Nasdaq recorded 75 new highs and 27 new lows.