Reduced tension with Turkey helps U.S. stock market rally

NEW YORK» U.S. stocks rallied Tuesday as banks, retailers and smaller companies jumped. That helped the market recover most of its losses from the previous two days.

The Turkish lira steadied as officials from Turkey and the U.S. said the countries are in talks to ease diplomatic tension, which has resulted in high tariffs on Turkish steel and aluminum. Stocks in emerging markets such as Argentina, Russia and Brazil jumped.

In the U.S., the biggest gains went to small and midsize companies, which do more business domestically compared with the large multinational firms on indexes such as the S&P 500 and the Dow Jones Industrial average. Retailers rose, thanks in part to strong quarterly reports.

The reduced tension with Turkey also stopped a rally in bond prices and sent yields and interest rates higher. That helped banks. Industrial and basic materials companies also rose Tuesday, but compared with other parts of the market, they didn’t recover as much of their losses.

Invesco chief global market strategist Kristina Hooper said investors are shifting money into more U.S.-focused companies in response to the Trump administration’s aggressive handling of its dispute with Turkey, a longtime member of NATO.

“This is a reminder that the U.S. is a very different country than it was just a few years ago,” she said.

The S&P 500 index climbed 18.03 points, or 0.6 percent, to 2,839.96. The Dow Jones Industrial Average gained 112.22 points, or 0.4 percent, to 25,299.92. The Nasdaq composite added 51.19 points, or 0.7 percent, to 7,870.89. The Russell 2000 index advanced 17.26 points, or 1 percent, to 1,692.58.

The S&P 500 fell a combined 1.1 percent Friday and Monday because investors were worried that Turkey’s financial woes would affect other countries.

Many retailers will report their quarterly results this week, a potential hint about how much money consumers are spending. Tapestry, the parent company of Coach and Kate Spade, jumped after its fourth-quarter results surpassed analysts’ estimates. The stock surged 12 percent to $53.16.

Auto parts retailer Advance Auto Parts jumped 7.8 percent to $156.13 after it did better than expected in the second quarter. Competitors AutoZone and O’Reilly Automotive climbed as well.

Smaller companies made outsize gains. Footwear maker Wolverine World Wide gained 2.4 percent to $38.39, and watchmaker Fossil rose 4.8 percent to $25.68.

Among midsize companies, Boston Beer picked up 3.9 percent to $291.30 and RV maker Thor Industries rose 2.6 percent to $97.06.

Global markets fell Friday and Monday amid concern that Turkey’s currency turmoil could spread to banks in other countries and affect the world economy.