US close: Dow extends winning streak into third day on reports of Mexican tariff reprieve

US stocks closed higher on Thursday, drawing a close to a tumultuous session on the Street and extending their rally to a third straight day.

At the close, the Dow Jones Industrial Average was up 0.71% at 25,720.66, while the S&P 500 closed 0.61% higher at 2,843.49 and the Nasdaq saw out the session 0.53% firmer to 7,615.55.

The Dow closed 181 points higher on Thursday despite Donald Trump doing his best to turn markets' attention away from comments made by Federal Reserve chair Jerome Powell earlier in the week indicating that the central bank would be open to easing monetary policy in order to save the economy.

The President dampened sentiment after reigniting tensions with China on Thursday, telling reporters at Shannon Airport in Ireland that, if necessary, Washington might impose tariffs on the $300bn-worth of Chinese which had not yet been targeted. He vowed to make a decision on the tariffs "probably right after the G-20" summit ends on 29 June.

However, major US indices took a turn for the best later in the session after Bloomberg reported that the White House was considering delaying Trump's threatened tariffs on Mexico as talks on immigration and drug smuggling continued.

Mexico has allegedly pushed for more time to negotiate over concerns the two sides won't be able to reach an agreement.

Trump had doubled down on threats to impose a 5% tariff on all imports from Mexico, which were set to come into effect on Monday, earlier in the session, claiming that progress in talks on immigration had been "not nearly enough".

With rate cuts still in the mix, executives at both Goldman Sachs and UBS warned that investors might be getting too far ahead of themselves with their expectations for the Federal Reserve to cut rates.

"I think the market has overpriced the amount of rate cuts that the Fed is likely to do," said UBS chairman Axel Weber.

Goldman Sachs president and COO echoed Weber's concerns when talking to CNBC.

"The market is pricing in a fairly substantial set of moves by the Fed," said Waldron. "I worry a little bit that the market is too optimistic about how much and how soon the Fed will move."

However, Bank of America analysts don't think that the market is going to be disappointed.

BoA noted that history offered a clear guide on how rate cuts tend to play out in the coming six-month period once the market starts to price in a rate reduction.

"History suggests the Fed typically cuts swiftly and does not disappoint market expectations at the outset of a cutting cycle."

Investors also digested news that the European Central Bank, which stayed put on rates and indicated it would likely keep them at their current levels until at least the middle of 2020.

In terms of the economic data, the number of Americans filing for unemployment benefits last week was steady, according to figures released by the Labor Department on Thursday.

US initial jobless claims were unchanged from the previous week's revised level at 218,000. The previous week's level was revised up by 3,000. Economists had been expecting claims to come in at 215,000.

Elsewhere, the productivity of American workers grew at an annualised pace of 3.4% during the first quarter, just below the government's initial estimate of 3.6%. However, the revised gain was still the biggest seen since 2014.

Lastly, the US trade deficit narrowed in April, with both imports and exports falling in the weeks leading up to the most recent flare-up in trade tensions between Washington and Beijing.

The shortfall in the country's foreign trade in goods and services narrowed by 2.1% month-on-month to reach a seasonally adjusted $50.79bn in April, according to the Commerce Department.

On the corporate front, JM Smucker was down 2.61% at the close after reporting better-than-expected earnings but cut its fourth-quarter guidance, while styling company Stitch Fix shot up 14.72% in the session after smashing EPS estimates.

Advanced Micro Devices climbed 7.86% after analysts at Morgan Stanley upgraded the US chipmaker from 'underweight' to 'equal-weight', while Ciena soared 26.85% after the network-and-communications infrastructure outfit reported second-quarter earnings and revenues well above expectations.

After the close, Beyond Meat soared 16.58% in extended trading after posting its first set of results as a publicly-listed entity.