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S&P 500 posts fifth straight day of gains amid positive trade reports

U.S. stocks ended higher amid positive reports for a U.S.-China trade deal and growth in eurozone economies.

The S&P 500 (^GSPC) rose 0.21%, or 6.16 points, as of market close, landing its fifth consecutive day of advances as the materials sector outperformed. The Dow (^DJI) rose 0.15%, or 39 points, while the Nasdaq (^IXIC) rose 0.6%, or 46.86 points.

Stocks, which posted their best three-month start to the year in more than two decades, have seen uncharacteristically low levels of volatility for this stage in the cycle, according to a Datatrek analysis that characterized volatility as sessions of at least 1% gains or losses in the S&P 500.

The large-cap index posted just 11 sessions of rising or falling at least 1% in the first quarter, noted Datatrek co-founder Jessica Rabe. This compares to a first-quarter average of 13 such sessions. Last year, the S&P 500 rose or fell at least 1% in 64 sessions, marking the most volatile year since 2015.

Two of the key reasons for low volatility in the first quarter of 2019 were the Federal Reserve’s reversal to pause on raising key interest rates, and a “snapback in equity buying after a deeply sold” fourth-quarter, Rabe wrote.

“We would not be surprised if volatility remains contained this quarter even though the S&P had an up 1% day on the first trading session of Q2,” she said.

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Some of the events market participants have been tracking most closely – including U.S.-China trade talks and signals for improving growth in global economies – saw positive developments overnight.

On Tuesday, the Financial Times reported that U.S. and Chinese officials are closing in on a trade agreement. Chinese Vice Premier Liu He is set to meet U.S. Trade Representative Robert Lighthizer and U.S. Treasury Secretary Steven Mnuchin for another round of discussions starting Wednesday in Washington, D.C.

In its report, FT said that two major sticking points including whether existing U.S. tariffs on Chinese goods will remain, and the extent to which enforcement measures should be put in place to ensure China abides by the eventual deal.

“You might think that the market is bored of trade war headlines, or ones suggesting progress anyway, but the revival in equities over the past few days suggests that the stock market is still very keen on a deal being done, with the potential for existing tariffs to be reduced or dropped entirely,” Chris Beauchamp, chief market analyst at IG Group, wrote in an email.

“That would remove one of the key worries for equities at present, and while investors are sure to find something else in due course (especially with earnings season coming up), it would provide a short-term boost as equity inflows recover to a degree,” he added.

On Tuesday, the World Trade Organization cut its projection for 2019 international trade growth to the weakest level in three years as tariff concerns continue to weigh. According to the WTO, trade growth in world merchandise will decelerate to 2.6% in 2019 and 3% in 2020, following a 3% advance in 2018.

The WTO in September had predicted global trade would grow by 3.7% in 2019.

“With trade tensions running high, no one should be surprised by this outlook,” WTO Director-General Roberto Azevedo said in a statement. “Trade cannot play its full role in driving growth when we see such high levels of uncertainty.”

China's Vice Premier Liu He, second right, shakes hands with U.S. Treasury Secretary Steven Mnuchin, second left, as Yi Gang, right, governor of the People's Bank of China (PBC) and U.S. Trade Representative Robert Lighthizer pose for a group photo at Diaoyutai State Guesthouse in Beijing Friday, March 29, 2019. (Nicolas Asfouri/Pool Photo via AP)

Trade growth last year was hindered by factors including new tariffs and retaliatory measures, weaker global economic growth, tighter monetary policy conditions and volatility in financial markets, the WTO said.

Elsewhere, new data pointed to a firming in non-manufacturing sectors in several major economies. In China, the private Caixin/Markit services purchasing managers’ index rose to 54.5 in March, bouncing back from February’s four-month low of 51.1. Readings above 50 indicate expansion in the sector.

Several major eurozone economies also saw recent growth in their services sectors, based on recent results. IHS Markit reported that services business activity in Germany grew in March at the fastest pace in six months as demand and customer numbers rose. In Italy, service sector business activity expanded in March at the quickest rate since September amid surging new order growth and faster job creation.

ECONOMY

Employment in the private sector rose less-than-expected in March, according to ADP/Moody’s monthly national employment report. The headline reading showed private sector employment rose by 129,000 in March, below consensus estimates calling for 175,000. The previous month’s reading for private sector employment gains was upwardly revised to 197,000, from 183,000 previously.

The ADP release, which precedes the Bureau of Labor Statistics’ “official” jobs report on Friday, could raise concerns that official non-farm payroll figures may come in below consensus estimates for a second straight month. However, many economists pointed out that the ADP report tends not to square up reliably with the BLS release, due to differences in methodology.

The Institute for Supply Management’s March reported Wednesday that economic activity in the non-manufacturing sector expanded at a slower pace than in February, with the headline index registering at 56.1, the weakest reading since August 2017. This was down from 59.7 in February, and below consensus estimates looking for a reading of 58 in March.

According to the ISM report, respondents remained “mostly optimistic about business conditions and the economy,” although there remain some concerns over employment resources and capacity constraints.

“The drop in the ISM non-manufacturing index to a 20-month low in March adds to the message from the incoming hard activity data that underlying domestic demand growth is slowing,” Michael Pearce, senior U.S. economist for Capital Economics, wrote in a note. “That said, the headline index is still far from recessionary levels, and is consistent on past form with solid GDP growth of around 2% annualized.”

Morning Brief

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck

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