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 safer such as government bonds and gold.
The S&P 500 advanced 1.5%, led higher by shares of technology companies. The Dow Jones Industrial Average jumped more than 400 points before paring some of its gains to rise 382 points, or 1.5%. The Nasdaq Composite gained nearly 2%.
Tuesday's rally showed that despite lingering fears about slowing global growth and a possible recession, investors remain preoccupied with trade talks. Developments on trade between U.S. and China can stoke big declines in the U.S. stock market and also spur stock rallies and moves in the metals and commodities markets.
The move 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 2% and Apple added 4.2%. Shares of department stores, discount chains and toy makers notched big gains as well. Best Buy shares added 6.5%.
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 S&P's 11 sectors.
Shares of Micron Technology added 4.8%.
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 early Tuesday 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 tariff news in early trading 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% Tuesday but remains near some of its highest levels of the year.
Trade tensions between the U.S. and China have rattled markets in recent days, injecting volatility into stock, bond and currency markets. Some analysts said they are expecting more short-term swings, wary that large one-day moves could be quickly reversed in coming days.
"We wouldn't recommend investors making large positions one way or another on equities" at the moment, said Jason Draho, head of Americas asset allocation at UBS Global Wealth Management.
In Europe, the benchmark Europe Stoxx 600 index erased its earlier losses to rise about 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.
"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.
Steven Russolillo and
contributed to this article.
Write to Gunjan Banerji at Gunjan.Banerji@wsj.com
(END) Dow Jones Newswires
August 13, 2019 16:38 ET (20:38 GMT)
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