Stocks rose on Thursday on the back of a report that said the U.S. could ease tariffs on Chinese goods during their trade negotiations with China.
That idea was floated by Treasury Secretary Steven Mnuchin, according to a Wall Street Journal report, which cited people close to the matter. The report, however, added that Mnuchin faced pushback from U.S. Trade Representative Robert Lighthizer, who thinks any concession could be seen as a sign of weakness.
However, the major indexes came off their highs after a Treasury Department spokesperson working with the trade team told CNBC: "Neither Secretary Mnuchin nor Ambassador Lighthizer have made any recommendations to anyone with respect to tariffs or other parts of the negotiation with China. This is an ongoing process with the Chinese that is nowhere near completion."
A senior administration official who participated in a trade meeting with the president on Wednesday later told CNBC that there is "no discussion of lifting tariffs now." The official also said President Donald Trump "has no interest in making decisions now, it would put him in a weaker position."
The Dow closed up 163 points, lifting itself out of correction territory. The S&P 500 ended the day up 0.76 percent while the Nasdaq climbed 0.7 percent.
"The good news is the reaction shows how much of a headwind the trade situation is on the market right now. It's like a coiled spring ready to react to a whiff of good news. The bad news is it needs to be more official and less floated," said Art Hogan, chief market strategist at National Securities.
Caterpillar shares spiked 2.2 percent, while Boeing jumped 2 percent. Caterpillar and Boeing shares are seen as bellwethers for global trade given their exposure to overseas markets. Apple also rose 0.6 percent.
Back in December, China and the U.S. agreed to stop slapping tariffs on each other's goods for 90 days while they tried to strike a deal on trade. Recent data has shown signs of weakness in China's economy.
Stocks had traded slightly higher earlier in the day as investors awaited Netflix's quarterly results. Netflix is scheduled to report after the close Thursday. The stock has been on a tear so far this year, rising more than 31 percent. Netflix's earnings will arrive after the streaming giant announced it would raise monthly subscription prices by 13 to 18 percent, a move that was cheered by Wall Street earlier this week. Dow member American Express is also set to report after the close.
"Some of the information we have gotten are surprisingly negative to me," said Kim Forrest, senior equity analyst at Fort Pitt Capital. "It's a mixed sort of earnings season so far."
"Today's information is super important, not just for Netflix, because these are our most discretionary dollars," Forrest said. "How is that being spent? Is it being spent the same way it was last year? I think that will tell us something about how healthy the consumer is and how healthy the economy is."
Morgan Stanley reported earnings and revenue that fell short of Wall Street estimates. The company's results were dragged down by poor performances in its trading and wealth management businesses. Morgan Stanley shares fell 4 percent. Citigroup, J.P. Morgan Chase and Wells Fargo also reported quarterly earnings this week.
Thursday's moves came after the major indexes posted solid gains in the previous session, lifted by the sharp gains in Goldman Sachs and Bank of America. For the week, the major indexes are all up more than 1 percent.
"Upside should now prove limited for global indices, with S&P likely to start to weaken and pullback and any strength would face strong overhead resistance between 2630-40," said Mark Newton, managing member at Newton Advisors, in a note.
"Indices have moved between 10-15% in the last 15 trading days since Christmas Eve, and have finally reached the 50% retracement levels (or fractionally below) from the decline from September/October," he added. "Structurally this area remains difficult as several lows were made at this area and now offer resistance on this rally."