The major domestic equity indexes closed higher Thursday, recovering from morning losses, after New York Federal Reserve president John Williams said the Fed’s wisest strategy is to cut interest rates at the first sign of economic distress when interest rates are already low.

“When you have only so much stimulus at your disposal, it pays to act quickly to lower rates at the first sign of economic distress,” Williams said, in a speech at a research conference in New York.

Williams said that when rates and inflation are low, policymakers cannot afford to keep their “powder dry” and wait for potential economic problems to materialize.

Stocks rebounded in the wake of what investors saw as confirmation of an interest cut at the Fed’s next policy meeting later this month.

Thursday is the last day for Fed policy makers speeches before the so-called blackout period for comment by officials ahead of the FOMC meeting July 30-31.

Before Williams’ comments, stocks had been lower as shares of Netflix fell 10.3% after the company’s quarterly results, which missed targets for new subscribers overseas.

Losses in Netflix triggered a 0.9% fall in the communication services sector, which has been one of the best-performing S&P sectors so far this year.

Meanwhile, investors are still monitoring corporate earnings, concerned about the lack of progress in resolving the U.S. China trade dispute.

Import tariffs on Chinese goods remained in place after President Trump’s meeting with China President Xi at the G20 Summit in Japan last month.

Stocks closed lower for a second day in a row on Wednesday after The Wall Street Journal reported that trade negotiations between the U.S. and China had faltered over restrictions on Chinese telecommunications giant Huawei, citing sources familiar with the talks.

However, Treasury Secretary Steven Mnuchin told CNBC that Huawei was not a sticking point in the negotiations, adding a call between U.S. and China trade officials.

Mnuchin, speaking on CNBC, on the sidelines of the G-7 finance ministers meeting in France said that trade talks with China are continuing apace. “Don’t believe everything you read in the press,” he said. 

Mnuchin said that he and top trade official Robert Lighthizer are set to engage in fresh talks with his counterparts in China soon.

To date, about 12% of S&P 500 index companies have reported quarterly results this earnings season and 84% have reported better-than-expected earnings, according to FactSet data.

Among positive earnings reports, shares of Philip Morris rose 8.2% after the company raised its full-year earnings outlook. Railroad operator Union Pacific rose 5.9% after the company’s earnings came in ahead of expectations.

IBM rose 4.6% as the company’s quarterly earnings exceeded consensus on strong growth in its high-margin cloud business.

Morgan Stanley rose 1.5% after the bank posted a better-than-expected quarterly earnings. The S&P 500 banks index was up 0.9% after three days of losses.

UnitedHealth fell 2.3% as the insurer said on its conference call that 2019 revenue would not hit its original target.

Earnings for S&P 500 companies are expected to rise 0.6% for the second quarter of 2019, according to Refinitiv IBES data. Until Wednesday, there were expectations of a dip in earnings.

In economic news, a survey of manufacturers in Pennsylvania, New Jersey and Delaware came in much stronger than expected at 21.8 in July, versus 0.3 in June and above expectations of 4.5, according to a MarketWatch poll of economists. New applications for jobless benefits rose by 8,000 claims.

Approximately 6.68 billion shares changed hands on the major domestic equity exchanges, as compared to the 6.67 billion share average over the past 20 trading days.

Jobless Claims Rise

The number of Americans filing applications for unemployment benefits increased moderately last week, indicating labor market conditions remain strong despite the slowdown in economic activity.

According to the report released by the Labor Department on Thursday morning, initial claims for state unemployment benefits rose by 8,000 claims to a seasonally adjusted 216,000 claims for the week ended July 13.

Data for the prior week was revised to show 1,000 fewer applications received than previously reported. Last week’s increase in claims was in line with expectations.

The four-week moving average of initial claims, considered a better measure of labor market trends as it irons out week-to-week volatility, fell by 250 claims to a total of 218,750 last week.

The Labor Department said no claims were estimated last week. The claims data tends to be volatile around this time of the year because of summer factory closures, especially in the automobile industry, which occur at different periods. This can throw off the model the government uses to strip out seasonal fluctuations from the data.

Layoffs remain low despite a bitter trade war between the United States and China, which has contributed to an economic slowdown resulting in the Federal Reserve signaling it would cut interest rates at its July 30-31 meeting for the first time in a decade.

Last week’s claims data covered the survey period for the nonfarm payroll’s component of July’s employment report. The four-week moving average of claims was little changed between the June and July survey periods, suggesting steady job growth this month. The economy created 224,000 jobs in June.

While the labor market remains strong, there are concerns that a shortage of workers and the Trump administration’s tougher stance on immigration could impede job growth.

Solid job growth is helping to underpin the economy, which is slowing as last year’s massive stimulus from tax cuts and more government spending fades. Manufacturing is struggling, the trade deficit is widening again, and the housing market remains weak, partially offsetting strong consumer spending.

Thursday’s claims report also showed the number of people receiving benefits after an initial week of aid fell 42,000 to 1.69 million for the week ended July 6. The four-week moving average of the so-called continuing claims rose 5,000 to 1.70 million.