Stocks rebound as markets eye U.S.-China trade negotiations.
U.S. stocks bounced back sharply on Tuesday, as investors avoided any further speculation on a China free trade agreement without first hearing word from official sources.
All of Wall Street’s major indices finished firmly higher on Tuesday. The Dow Jones Industrial Average (NYSEARCA:DIA) climbed 207.06 points, or 0.8%, to 25,532.05. The blue-chip index plunged more than 600 points on Monday.
The broader S&P 500 Index (NYSEARCA:SPY) gained 0.8% to finish at 2,834.41. Ten of 11 primary sectors reported gains.
Meanwhile, the technology-focused Nasdaq Composite Index (NYSEARCA:QQQ) jumped 1.1% to settle at 7,734.49.
A measure of implied volatility known as the CBOE VIX (NYSEARCA:VXX) declined sharply on Tuesday, as a semblance of calm returned to Wall Street. VIX, which trades on a scale of 1-100, fell 12.4% to 18.01. VIX surged more than 30% on Monday.
The U.S.-China trade war continued to heat up on Tuesday as Washington officials listed an additional $300 billion worth of Chinese goods for possible tariff increases. One day earlier, China announced tariffs on an additional $60 billion of American goods.
“China will fight to the finish,” a spokesman for Beijing’s foreign ministry said. “China’s countermeasures have shown our determination to safeguard the multilateral trade system.”
It’s not clear when talks are scheduled to resume. The last round of talks were held on Thursday in a session that Treasury Secretary Steven Mnuchin described as “constructive.”
The Final Word: A prolonged trade war between the two largest superpowers doesn’t bode well for stocks, especially at a time when seasonal influences keep investors away from the market. A more volatile trading climate could see equity indices drift further from record highs, negating a large portion of the 2019 rally.