U.S. Stocks Rally on Tariff Delay -- Update
14 August 2019 - 7:37AM
Dow Jones News
By Gunjan Banerji
Stocks, bond yields and commodities jumped Tuesday as news that
the U.S. would delay some tariffs against China rekindled
investors' hopes for an eventual trade truce.
The Trump administration announced it plans to delay and remove
items from the roughly $300 billion of Chinese imports facing
tariffs on Sept. 1. The development sent investors rushing back
into stocks after an extended bout of market volatility and two
days of declines for major U.S. indexes. Investors also piled into
commodities, while shedding exposure to assets considered
relatively safe such as government bonds and gold.
The S&P 500 advanced 42.57 points, or 1.5%, to 2926.32, led
higher by shares of technology companies. The Dow Jones Industrial
Average jumped 372.54 points, or 1.4%, to 26279.91. The Nasdaq
Composite gained 152.95 points, or 1.9%, to 8016.36.
Tuesday's rally showed that despite lingering fears about
slowing global growth and a possible recession, investors remain
preoccupied with trade talks.
The decision by the Trump administration also assuaged some
fears about a potential currency battle between two of the largest
global economies. After President Trump decided to extend punitive
tariffs on almost all Chinese goods, China's currency fell against
the dollar, prompting the U.S. to accuse Beijing of manipulating
its currency. The moves spurred a week of turbulence that rippled
through stock, bond and currency markets.
Among individual stocks that have been sensitive to trade talks,
Caterpillar shares jumped nearly 2% and Apple added more than 4%.
Shares of department stores, discount chains and toy makers notched
big gains as well. Best Buy shares added more than 6%.
Shares of technology companies outperformed as smartphones,
laptop computers and toys are among the categories benefitting from
the tariff reprieve. The S&P 500's information-technology
sector advanced about 2.5%, making it the best performing of the 11
sectors.
Optimism about trade also rippled through commodities markets.
Copper rose after slumping in recent weeks on trade tensions. Brent
crude oil gained 4.7%, its biggest one-day gain since December.
"In the very short term, this takes a little bit of pressure
off," Mike Bailey, director of research at FBB Capital Partners,
said of the trade news.
Investors' sale of traditionally safer assets like government
bonds sent yields higher. The yield on the 10-year Treasury note
rose to 1.678% from 1.640% Monday. Government bond yields around
the world had fallen before the announcement about the tariff
reprieve early Tuesday, with the yield on the 30-year Treasury on
track to settle at a record low before it started inching higher
later in the day.
The yield on the German 10-year bund fell to minus 0.617%, a
record intraday low, after a key survey of business expectations
showed a sharp drop in sentiment.
Gold lost 0.2% but remains near some of its highest levels of
the year.
Some analysts said they are expecting more short-term swings in
the stock, bond and currency markets, wary that large one-day moves
could be quickly reversed in coming days.
"In the near term it is a positive," said Parag Thatte, a
strategist at Deutsche Bank AG. But, "uncertainty being caused by
the trade war" remains.
In Europe, the benchmark Europe Stoxx 600 index erased earlier
losses to rise 0.5%.
Elsewhere, the selloff in Hong Kong stocks accelerated, with the
Hang Seng Index falling 2.1% amid continued political unrest. This
week's selloff in Hong Kong stocks meant the Hang Seng Index --
which has lost 11% since the beginning of July, when the protests
turned more violent -- has joined Korea's Kospi as the second major
global benchmark in negative territory this year.
Steven Russolillo and
Anna Isaac
contributed to this article.
Write to Gunjan Banerji at Gunjan.Banerji@wsj.com
(END) Dow Jones Newswires
August 13, 2019 17:22 ET (21:22 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.