U.S. stocks erase most of an early loss as volatility surges
NEW YORK» Stocks overcame a big loss on Wall Street on Wednesday, though the market’s recovery left plenty of signs of worry among investors that the fallout from the trade war between the U.S. and China will spread.
A late-afternoon rally lifted most of the major stock indexes out of the red, reversing most of the early slide that briefly pulled the Dow Jones industrial average down more than 580 points.
Technology and consumer staples stocks powered much of the gains, offsetting losses in banks, energy companies and other sectors.
Even so, the moves in the bond and commodities markets signaled investors are nervous that the escalating trade war between the U.S. and China may derail the global economy.
Bond yields sank around the world, something that happens when investors see a weaker economy and low inflation on the way. The price of oil tanked, and the price of gold shot up to its highest level in six years as traders sought safe-haven holdings.
“You did see buyers come back to the market, which is a good sign for the market in the near term,” said Lindsey Bell, an investment strategist with CFRA Research. “Investors need to buckle in for some volatility in the next couple of months.”
The S&P 500 index eked out a gain of 2.21 points, or 0.1%, to 2,883.98. The index was down 2% during the heaviest bout of selling.
The Dow ended up dropping 22.45 points, or 0.1%, to 26,007.07. It had been down 589 points.
The Nasdaq led the market’s upward swing, climbing 29.56 points, or 0.4%, to 7,862.83. The Russell 2000 index of smaller companies lost 1.40 points, or 0.1%, to 1,500.69.
The market has been roiled the past couple of weeks by growing anxiety as the U.S. and China continue to clash over trade.
Last week, President Donald Trump rattled markets when he promised to impose 10% tariffs next month on all Chinese imports that haven’t already been hit with tariffs of 25%. China struck back Monday, allowing its currency, the yuan, to weaken against the U.S. dollar.
China stabilized the yuan Tuesday, and that helped lift U.S. stocks one day after they endured their worst day of the year. But the markets turned volatile again early Wednesday after central banks in New Zealand, India and Thailand cut key interest rates.
The surprise rate cuts triggered a slide in bond yields around the world as investors scrambled for safety.
The yield on the 10-year Treasury touched its lowest level in nearly three years, falling as low as 1.60% from 1.74% late Tuesday, before climbing back to 1.73%. It was above 3% in late November.
Some investors saw the big drops Wednesday morning as an opportunity to buy stocks at cheaper prices.
“I see some stocks that look great that I’m buying today,” said George Young, a portfolio manager at Villere & Co. “I just can’t make much of a case for bonds right now.”
The market’s turbulent turn came less than two weeks after the benchmark S&P 500 hit an all-time high.
While investors have been scrambling to adjust to the turns in the trade conflict, the broader U.S. economy continues to grow and add jobs. Unemployment is at the lowest level in decades and consumer confidence remains strong.