Equities and bonds advanced as a larger-than-expected drop in the US trade deficit bolstered optimism about the accelerating pace of growth in the world's largest economy, while a Federal Reserve official recommended maintaining a high level of stimulus.
The US trade deficit narrowed more than expected in November, shrinking 12.9 percent to US$34.3 billion, Commerce Department data showed.
"The report should dispel worries that fourth quarter growth will be really weak," Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania, told Reuters. "It may not be robust, but should set us up for even better growth this year."
Accelerating earnings growth will help boost equities this year, according to JPMorgan Chase chief US equity strategist Thomas Lee, Bloomberg News reported. After climbing 6 percent this quarter, S&P 500 profit will rise 10 percent in the second quarter, 11 percent in the third and 14 percent in the fourth, according to Lee's estimates.
In afternoon trading in New York today, the Dow Jones Industrial Average gained 0.64 percent, while the Standard & Poor's 500 Index rose 0.52 percent and the Nasdaq Composite Index climbed 0.77 percent.