U.S. stocks turned higher on the final trading day of the third quarter, with all three major indexes on course to end the period with big gains.
The Dow Jones Industrial Average rose 44 points, or 0.1%, to 26483. The S&P 500 and the tech-heavy Nasdaq Composite both added 0.1%.
Stocks have retreated this week but remain just below their all-time highs. A strengthening U.S. economy is expected to keep the rally going and has been a key factor in helping investors look past the continuing trade tensions between the U.S. and China and other nations.
Some of the growth is tied to the tax overhaul passed last year. The changes, which included a cut to the corporate tax rate, sent corporate profits sharply higher through the first two quarters of the year, and analysts expect third-quarter earnings to be robust as well.
The Dow industrials are on track to rise 8.8% in the third quarter, while the S&P 500 is up 7.1% and the Nasdaq Composite has risen 6.9%.
Tesla shares were among the biggest movers, sinking more than 12% after the Securities and Exchange Commission accused Chief Executive Elon Musk of misleading shareholders about a corporate buyout in tweets last month.
The financial sector fell 0.5% in the S&P 500, a modest decline after European bank shares came under pressure amid worries about Italy’s budget.
Peter Cardillo, chief market economist at Spartan Capital Securities, doesn’t think U.S. markets should be too concerned.
“I wouldn’t put too much weight on what’s happening in Italy,” Mr.Cardillo said. “We’re not looking at a full-blown crisis that would equate to what we saw in Greece.”
Heading into the final quarter of the year, Mr. Cardillo is watching for how international trade tensions could affect quarterly results.
The Stoxx Europe 600 declined 0.6% as bank shares slid, while Italy’s FTSE MIB index dropped 3%, on track for its worst day since the Brexit vote in June 2016.
The losses came after Italy’s antiestablishment government significantly widened its budget-deficit target for next year to 2.4% of gross domestic product. That that will likely put it on a collision course with the European Union, which sets a budget-deficit cap of 3% of GDP for members of the bloc. The full budget will be unveiled in October and will be scrutinized by the European Commission, which could reject it.
“It makes debt sustainability a little bit harder, but more importantly, the unwillingness [of the Italian government] to back down [on campaign spending promises] just yet is the interesting aspect to watch,” said Tim Graf, head of macro strategy for EMEA at State Street Global Markets. “Even if the current impasse is resolved, the government is very popular and I don’t think their attitude toward the EU will change,” he said.
Earlier, stocks in Asia mostly climbed. Japan’s Nikkei rose 1.4% to an eight-month high after touching its best intraday level since 1991, led by technology, electronic and chemical stocks after the yen fell to a nine-month low against the dollar.
The Shanghai Composite Index rose 1.1% and Hong Kong’s Hang Seng edged up 0.3% at the end of a bruising quarter.