By Chris Matthews, MarketWatch , Clive McKeef

U.S. tariffs on cell phones, laptop computers imported from China delayed before year-end holidays

U.S. stocks closed sharply higher Tuesday after the Trump administration backed off on imposing tariffs on some Chinese imports from Sept. 1, following recent sharp falls in equity markets and ahead of a politically damaging rise in prices for consumer goods later this year due to the proposed levies.

The news of a de-escalation in the trade war overshadowed concerns about slowing economic growth and the potential for Beijing to crack down on protests in Hong Kong, one of Asia's most important financial and trade hubs.

How are the major benchmarks performing?

The Dow Jones Industrial Average rose 382.20 points, or 1.48%, at 26,279.91 for the biggest gain in two months. The S&P 500 index added 43.23 points, or 1.5%, to 2,926.32. The Nasdaq Composite index rose 152.95 points, or 1.95%, to 8,016.36.

On Monday, the Dow slumped 389.73 points (http://www.marketwatch.com/story/dow-futures-down-200-points-on-us-china-trade-worries-hong-kong-unrest-2019-08-12), or 1.5%, to end at 25,897.71, while the S&P 500 declined 35.56 points, or 1.2%, to finish at 2,883.09. The Nasdaq Composite closed at 7,863.41, a fall of 95.73 points or 1.2%.

What's driving the market?

Some investors took Tuesday's announcement as a sign that the White House understood the trade war was starting to hurt U.S. consumers, despite President Trump's claim that China was bearing the cost of the tariffs.

Early Tuesday U.S. Trade Representative announced (http://www.marketwatch.com/story/trump-slams-china-over-farm-trade-as-us-delays-tariffs-on-computers-cell-phones-2019-08-13)major revisions to the planned 10% tariff on $300 billion in annual imports from China earlier announced by President Trump on August 1.

Products that will not be subject tariffs from September include "cell phones, laptop computers, video game consoles, certain toys, computer monitors, and certain items of footwear and clothing," according to the statement.

The delays mean that goods worth $152 billion, or more than half of the original $300 billion list, will now not be hit with tariffs until mid-December. Apple (AAPL), one of the main beneficiaries of the delayed tariffs on cell phones, usually introduces its new iPhone models in September.

A USTR spokesman also told MarketWatch (http://www.marketwatch.com/story/us-to-delay-some-china-tariffs-as-officials-hold-discussions-2019-08-13) that U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin held discussions with Chinese Vice Premier Liu He, and officials would speak again within two weeks. According to Chinese news outlet CGTN, the call for the world's two largest economies to meet again on trade came from Lighthizer, not China.

"The three-month delay to the imposition of tariffs on more than half of the $300bn of Chinese imports, originally scheduled to take effect next month, is obviously designed to avoid a politically-damaging rise in consumer prices ahead of the holiday season," said Andrew Hunter, senior U.S. economist, at Capital Economics.

"It should not be misinterpreted as a sign that trade tensions are easing," he added. "Tensions will probably continue to ebb and flow over the coming months, resulting in further bouts of volatility in the markets, but we still see a continued escalation as the most likely outcome."

Geopolitical risk remains a factor for investors though with protesters thronging Hong Kong International Airport (http://www.marketwatch.com/story/protesters-clog-hong-kong-airport-again-after-it-reopens-2019-08-13) for a second day in a row Tuesday, a day after they forced the transport hub to shut down entirely. The number of protesters has fallen from an estimated 2 million who marched on June 16th to 350,000 during the general strike which disrupted transport last week, but the protests have grown more violent.

Hong Kong accounts for only about 3% of China's GDP currently, down from 20% before the U.K. handover to China in 1997, but Hong Kong hosts the world's fourth largest stock exchange and cross border banking has doubled in the past decade with much of it for Chinese companies borrowing in U.S. dollars. About 60% of the $2 trillion of foreign direct investment into China flows through Hong Kong.

Opinion:A Tiananmen 'solution' in Hong Kong would destroy its economy (http://www.marketwatch.com/story/a-tiananmen-solution-in-hong-kong-would-destroy-its-economy-2019-08-12)

Argentina is again a concern for investors also after a plunge by the Argentine peso following a poor showing by pro-business President Mauricio Macri in a primary election on Sunday.

"Developments in the financial hub of Hong Kong are adding to an already tense geopolitical picture amid ongoing U.S.-Sino trade tensions," said Fiona Cincotta, senior market analyst at City Index in a note. "Investors are once again pulling out of riskier assets such as equities," while flows into haven assets are on the rise."

Read:How Hong Kong clashes could wallop the U.S. stock market (http://www.marketwatch.com/story/how-hong-kong-clashes-could-wallop-the-us-stock-market-2019-08-12)

See:Argentina fund swoons as Macri suffers primary defeat (http://www.marketwatch.com/story/argentina-fund-swoons-as-macri-suffers-primary-defeat-2019-08-12)

Concerns about Hong Kong are adding to doubts on the global economic outlook, which were also reinforced by downbeat data from the eurozone's largest economy. The ZEW indicator of German economic sentiment fell to -44.1 in August (http://www.marketwatch.com/story/german-zew-falls-to-worst-level-in-more-than-seven-years-2019-08-13), down from -24.5 in July and marking the lowest reading since December 2011. Economists polled by FactSet had looked for a -28 reading.

On the U.S. data front, the cost of living over the past 12 months climbed to 1.8% from 1.6% (http://www.marketwatch.com/story/higher-gas-prices-rent-boost-cost-of-living-in-july-cpi-shows-but-us-inflation-still-mild-2019-08-13), but it's still well below last year's peak of 2.9%. The survey of consumer prices tends to run hotter than the Fed's preferred inflation barometer known as the price index for personal consumption expenditures. The PCE is up just 1.4% over the past year, well below the Fed's 2% inflation target.

Which stocks are in focus?

Apple (AAPL) was up more than 4% after news that some computer products would avoid tariffs for now. Best Buy(BBY) rose by more than 6% on the tariff delay also.

Shares of CBS Corp. (CBS) and Viacom Inc. (VIA) rallied after the media and entertainment companies announced a merger deal (http://www.marketwatch.com/story/cbs-viacom-stocks-rally-after-all-stock-merger-deal-announced-2019-08-13), creating a combined company -- ViacomCBS Inc. -- with more than $28 billion in revenue.

U.S.-listed shares of J.D.com(JD) rose 10.2% Tuesday, after the China-based e-commerce company reported second-quarter earnings (http://www.marketwatch.com/story/jdcoms-stock-surges-on-heavy-volume-after-earnings-beat-2019-08-13) that beat expectations.

Shares of Genworth Financial Inc. (GNW) rallied 13% Tuesday, after the insurer announced an agreement (http://www.marketwatch.com/story/genworth-shares-soar-156-premarket-on-news-of-sale-of-stake-in-canada-unit-for-18-billion-2019-08-13) to sell a majority stake in Genworth MI Canada to Brookfield Business Partners LP for about C$2.4 billion ($1.8 billion).

Shares of CIT Group(CIT) were expected to be in focus after it announced its CIT Bank N.A. subsidiary was in a deal (http://www.marketwatch.com/story/cit-to-buy-mutual-of-omaha-bank-for-1-billion-2019-08-13-691391) to buy Mutual of Omaha's savings bank subsidiary, Mutual of Omaha Bank, for $1 billion in cash and stock. The stock fell 3.2% Tuesday.

How are other markets trading?

European stocks also staged a turnaround following the trade news, with the Stoxx Europe rising 0.5% after falling as much as 1% earlier Tuesday.

Safe-have assets also reversed course early Tuesday, with the yield on the 10-year U.S. Treasury note , erasing declines to be up 4 basis points at 1.68%, while gold futures fell about 0.2% to $1,501 per ounce. The spread between two- and 10-year yields hit the narrowest since 2007. (http://www.marketwatch.com/story/the-30-year-treasury-bond-yield-is-on-the-brink-of-falling-to-an-all-time-low-2019-08-12)

The price of crude oil rose 3.7% to about $57.

Asian markets declined (http://www.marketwatch.com/story/asian-markets-fall-as-hong-kong-tensions-remain-high-2019-08-12) overnight Monday as investors kept an eye on developments in Hong Kong, with the Hang Seng Index falling 2.1%, bringing its August decline to 9%. China's CSI 300 lost 0.9% and Japan's Nikkei 225 shed 1.1% overnight.

(END) Dow Jones Newswires

August 13, 2019 16:13 ET (20:13 GMT)