By Avantika Chilkoti and Gunjan Banerji
The Dow Jones Industrial Average edged higher as trade tensions with China appeared to cool further, putting the blue-chip index on track for a third consecutive week of gains and within a hair of its record.
The 30-stock index rose 0.2%, on track for its eighth straight session of gains. The S&P 500 added 0.1%, and the Nasdaq Composite slipped less than 0.1%.
China said it wouldn't impose new tariffs on U.S. soybeans, pork and other agricultural goods, a further sign of easing tensions between the two largest economies. That, along with the prospect of looser monetary policy around the globe, helped lift stocks this week, pushing major indexes back toward highs reached in July. All three indexes are on track for their third week of gains after a volatile August that rattled share prices and government bond yields around the world.
China's move on Friday was the latest sign of progress in U.S.-China trade talks. The Wall Street Journal reported Thursday that Beijing was making efforts to narrow the scope of negotiations with the U.S., separating issues like national security that have held up the talks. That came after President Trump on Wednesday postponed new tariffs that were set to be imposed on $250 billion of Chinese imports from Oct. 1.
Some concerns about growth in the U.S. eased Friday. Investors dumped safer assets like Treasurys after fresh data showed that American shoppers spent strongly in August, with retail sales rising more than expected by economists. The yield on the 10-year Treasury note rose to 1.834%, according to Tradeweb, from 1.789% Thursday. Yields rise as bond prices fall.
Shares of financial companies in the S&P 500 were some of the biggest gainers as Treasury yields rose.
The Stoxx Europe 600 edged up 0.3% in midday trade. The relative quiet came after a volatile day for European stocks Thursday when the ECB launched a long-awaited package of stimulus measures, including an interest-rate cut and a renewed program of bond purchases, known as quantitative easing.
Moritz Sterzinger, a director at financial-advisory firm JCRA, flagged concerns that further quantitative easing might have limited impact on growth and inflation, given that interest rates are in negative territory.
He questioned: "How big are the diminishing returns to monetary stimulus, and how effective are additional rate cuts and another round of quantitative easing going to be in terms of stimulating the economy?"
The ECB also set plans for a new two-tiered system for charging interest on the deposits held by eurozone banks, in an effort to ease some of the losses lenders face as rates dip further into negative territory. The central bank set up an updated lending program.
Analysts at Rabobank said the new measures are good news for banks and "unequivocally positive" for those in the periphery of the eurozone in particular.
Among the biggest gainers in Europe on Friday was London Stock Exchange Group after it rejected a $36.6 billion bid from the Hong Kong Exchange and Clearing Ltd. LSE shares were up 1.9%.
In Asia, Hong Kong's Hang Seng Index rallied 1% and Japan's Nikkei was up 1.1%. Markets in China, Korea and Taiwan were closed for a holiday.
Still, some investors remain on edge. U.S. stocks ascended for much of last year before relinquishing their gains and falling into negative territory toward the end of the year as concerns about economic growth around the world weighed on share prices. Some investors are wary about a re-do.
Joe Mallen, chief investment officer of Helios Quantitative Research, said that he's optimistic about an eventual trade deal but he's still girding for more volatility in the next few months.
"There's still going to be some turbulence," Mr. Mallen said.
For example, any surprises from the Federal Reserve meeting next week--when investors are expecting the central bank to slash rates for the second time this year--could rattle confidence among investors. Fresh data this week showed that inflation picked up recently, potentially altering the case for greater cuts ahead.
The WSJ Dollar Index, which measures the currency against a basket of its peers, slipped 0.2% in early trading.
Write to Avantika Chilkoti at Avantika.Chilkoti@wsj.com and Gunjan Banerji at Gunjan.Banerji@wsj.com