STOCKS BOUNCE BACK
Despite the rally Tuesday, traders still see signs of investor caution
U.S. holds off on imposing some tariffs, causing surge in buying >>
And back up goes the stock market.
Investors flipped back into buying mode Tuesday after the U.S. said it would hold off on tariffs of Chinese imports of mobile phones, toys and several other items typically on holiday shopping lists. China also said the two sides held discussions on trade overnight and would talk again the next two weeks.
The latest turn in the U.S.-China trade war helped the market make up much of the losses from the previous two days, snapping a two day losing streak for the S&P 500.
The benchmark index rose 43.23 points, or 1.5%, to 2,926.32. It had been up as much as 2.1%. The Dow Jones Industrial Average gained 372.20 points, or 1.4%, to 26,279.91. The average briefly climbed 519 points.
The Nasdaq composite jumped 152.95 points, or 1.9%, to 8,016.36. The Russell 2000 index of smaller company stocks rose 16.30 points, or 1.1%, to 1,510.58. Oil and copper prices surged.
“Maybe today is a little bit too exaggerated because it was a little glimmer of hope about tariffs,” said Karyn Cavanaugh, senior markets strategist at Voya Investment Management. “However, the drama with China and trade is not over.”
The markets have been in the spin cycle since President Donald Trump announced on Aug. 1 that he would impose 10% tariffs on about $300 billion in Chinese imports, which would be on top of 25% tariffs already in place on $250 billion of
imports. The threat dashed hopes that a resolution may come soon in the trade war between the world’s two largest economies, and investors have grown increasingly concerned that it may drag on through the U.S. elections in 2020.On Tuesday, The Office of the U.S. Trade Representative said it would delay the tariffs on some products, including popular consumer goods, until Dec. 15. A few other products were removed altogether, including certain types of fish and baby seats.
Technology sector stocks, which have been among the biggest losers during heavy selling days this month, led the broad market rebound Tuesday. Health care companies, retailers and banks also notched solid gains. Real estate and utilities lagged the broader market as investors regained their appetite for riskier assets.
While stocks rallied Tuesday, there are still signs of investor caution. Treasury yields have sunk, and gold prices have jumped as investors searched for safety on worries the trade war could knock the U.S. economy back into recession for the first time in a decade. The yield on the 10-year Treasury rose Tuesday, but it remains below its level when Trump’s 2016 election invigorated markets. Gold fell just 0.2% and remains near a six-year high.