US stocks rally on data, trade talks

US stocks surged Thursday on positive economic reports and after the US and China said they would hold high-level talks in Washington in October, rekindling hopes for an eventual trade truce.

China's Ministry of Commerce Ministry said Thursday that its trade team would lay the groundwork with their US counterparts in mid-September for the October talks.

That pushed Asian, European and US stock markets higher. Wall Street's three main indexes touched their highest level since Aug 1.

The Dow Jones Industrial Average rose 372.68 points, or 1.41 percent, to 26,727.4, the S&P 500 index gained 38.2 points, or 1.30 percent, to 2,975.95. The Nasdaq Composite added 139.95 points, or 1.75 percent, to 8,116.83.

Investors were cheered by strong US economic data that eased concerns about an economic downturn, which was exacerbated on Tuesday by data that showed factory activity contracted in August for the first time in three years.

The US services sector accelerated in August, rebounding from its weakest level in nearly three years, as new orders rose to their highest level since February amid trade worries.

ADP Research Institute data showed US companies added the most jobs in four months in August while jobless claims stayed low last week. Hiring at small businesses jumped by 66,000, a four-month high, the ADP data showed.

The ADP report is considered a precursor to the Labor Department's more comprehensive jobs report that will be issued Friday.

The report Friday is projected to show that nonfarm payrolls rose by 160,000 in August, versus 164,000 the previous month. Estimates are for unemployment to be steady at 3.7 percent and the average hourly earnings rate of increase to slow to 3 percent.

"Manufacturing is in a bit of a global slump, but if you look at the other economic data, like the services and jobs reports, none of them point to an economy that is teetering on a recession," Michael Antonelli, market strategist at Robert W. Baird in Milwaukee, Wisconsin, told Reuters.

Usha Haley, a professor of international business at Wichita State University, disagreed, calling the rise in stocks "a sugar high''.

"The fundamentals have not changed. I have changed my opinion and feel we are on our way to a recession. Global indicators point in that direction. The US-China loud and jingoistic talk and actions on trade have expedited the process," he told China Daily in an email.

Scott Reeves and The Associated Press contributed to this story.