Markets on Tuesday leaped from a week-long stock swoon caused by deteriorating trade talks with China and menacing signals from the Persian Gulf.
All three indexes surged on right from the opening bell, with the Nasdaq composite and Standard & Poor’s 500 index posting their best return since May 3.
The Dow Jones industrial average bounced back from Monday’s 617-point loss, closing at 25,534 on Tuesday, a 209-point, or 0.83 percent, daily climb. It was the Dow’s best session in since April 12th. At its peak, the Dow surged upward 363 points after President Trump called the escalating trade war with China “a little squabble.” The Dow is down 1.67 percent for the last five sessions, but is holding a 9.45 percent gain on the year.
Dow Inc., Visa and Caterpillar led the Dow on Tuesday with 25 out of 30 blue chips in positive territory at the close. Coca-Cola was up after an upgrade by Morgan Stanley. Shares of Apple rebounded after a 5 percent drop Monday. UnitedHealth and McDonald’s were the Dow’s big drags.
High-profile Uber Technologies had its first positive close since it began trading last Friday. The ride-hailing giant rode the tech sweep, rallying 7.7 percent after declining 17 percent in its first two days as a publicly-traded company.
“We saw some bargain hunting in the stock market, first with European stocks and then with U.S. stocks, which drove the market higher,” said Kristina Hooper, global market strategist at Invesco. “The move is quite modest compared to the dramatic sell-off we saw yesterday. That makes sense. It appears that trade tensions between the U.S. and China are worsening. But it’s a good sign that investors are already sniffing around for buying opportunities.“
The S&P 500 index, which saw $1.1 trillion in wealth evaporate on Monday’s slide, gained .80 percent Tuesday to close at 2,834, well above 2,800. Wall Street regards 2,800 as a key threshold. The S&P has retreated 1.72 percent over the last five days, but is up a healthy 13 percent on the year. Ten of 11 sectors were up on Tuesday, with safe-haven utilities the only drag. The big S&P leaders were information technology, energy and materials.
The Nasdaq had been buried under the fallout from the sell-off in technology stocks in the last week, advanced 87 points to close at 7,734, up more than 1 percent. Three out of five FAANG stocks — Facebook, Apple, Amazon, Netflix and Google-parent Alphabet — were in the black. Alphabet and Facebook were the losers. The Nasdaq has given up 2.88 percent the last five days, but it is ahead 16.6 percent on the year.
European markets bounced across the board, led by France’s CAC 40, which had pushed 1.34 percent to the positive Tuesday. Shares of chemical giant Bayer were down more than 2 percent after a California jury awarded more than $2 billion to a couple who blamed their cancer diagnoses on the company’s Roundup weed killer.
The markets turned volatile more than a week ago, after once-optimistic U.S.-China trade talks deteriorated into an exchange of tariff salvos between the world’s two biggest economies. In Beijing, the government announced it would impose tariffs on $60 billion worth of American products in retaliation for the higher tariffs that President Trump implemented on $200 billion in Chinese goods.
Trump, meanwhile, began expanding U.S. tariffs to blanket all $540 billion in Chinese imports. The markets’ pause Tuesday may have to do with the president still holding out the possibility of a deal before the sides roll into a full-blown trade war.
Trump suggested in a series of tweets Tuesday morning that the two countries might still reach an accommodation on trade without resorting to tariffs on all goods sold between the nations. He followed up later by calling the standoff “a little squabble.”
“The market is digesting what Trump said,” said Kenny Polcari of ButcherJoseph Asset Management. “He is positive on the potential outcome. However, there is no deal, nothing is cast in stone, retaliatory tariffs are being imposed. As much as the president said the talks are robust, there’s still those overhanging threats.”
Analysts said Tuesday that investors are resetting their holdings in anticipation that the trade anxiety had burned off in Monday’s rout.
“This is a natural reaction to potential slower growth,” said Brad McMillan, chief investment officer at Commonwealth Financial Network. “Tariffs are going to slow growth in the U.S. and China. Markets should be lower. Now that they have adjusted, we will see values stabilize and even come back. A trade deal is still the most likely outcome, despite the current noise.”
Oil prices were on the rise Tuesday following reports of a drone attack on Saudi Arabian oil pumping stations.
News of the apparent drone strike followed a Saudi report over the weekend that said two of its oil tankers had sustained “significant damage” during an attack in coastal waters near the Persian Gulf, heightening tensions with Iran.
Frank Verrastro of the Center for Strategic and International Studies said a series of events are converging to push oil prices ahead. That includes the fear of a consumption slowdown due to China-U.S. trade disagreements, disruptions from Trump’s Iran sanctions and declining production in Algeria, Nigeria, Libya and Venezuela. With the recent drone and tanker attacks piled into that scenario, Verrastro said the likelihood is strong for a surge in oil prices.
“There is potential for bigger upside on prices because of all the supply disruptions lurking,” Verrastro said. “These could be daily disruptions in the millions of barrels."
U.S. benchmark West Texas Intermediate futures were up 68 cents, or 1.1 percent, flirting with $62 per barrel Tuesday afternoon. Brent crude futures were selling at more than $71 per barrel, an increase of nearly $1 or 1.35 percent.