The Standard & Poor’s 500 index rose 0.9 percent while the tech-laden Nasdaq composite rose 1 percent.
White House and Chinese officials plan to meet Thursday and Friday to try and narrow their differences in the trade discussions. Although some investors hoped that a breakthrough was within reach, there have been growing signs in recent days that relations between the two countries had only worsened.
China this week lashed out at the National Basketball Association and western businesses for what it viewed as improper support for Hong Kong protests. The Trump administration, meanwhile, blacklisted a range of Chinese firms amid allegations of human rights abuses, prompting an angry protest from the Chinese government.
Whether these escalating problems can be resolved during two days of talks is unclear, but the prolonged trade war has shown growing signs that it is causing problems for the economies in both countries. The Fed released the “minutes” of its September meeting on Wednesday, and the word “trade” appeared in the discussion 28 times. It said, among other things, that “trade policy concerns continued to weigh on firms’ investment decisions,” a sign that companies were cutting back while they await a resolution of the White House standoff with China.
Also Wednesday, the Bureau of Labor Statistics reported that the number of new job openings had fallen to its lowest level since March 2018. The labor market has cooled a bit this year but it has remained relatively strong. Any sign of weakening heading into the 2020 election could create problems for the White House.
President Trump has insisted on nailing down a broad trade agreement that includes intellectual property protections for American companies doing business in China. But he also has said he would consider a smaller-scale deal.
Chinese Vice Premier Liu He is scheduled to meet this week with U.S. Trade Representative Robert E. Lighthizer and other officials in Washington. The two have been holding stop-and-go negotiations for nearly a year. To try to force Chinese officials to negotiate, Trump has slapped tariffs — or import penalties — on close to $300 billion in Chinese goods. Tariff rates are set to move higher on Oct. 15, and then even more goods will face import penalties in December.
Trump contends that China must change its trade practices if it wants to make a deal. He has accused the government of stealing intellectual property from U.S. companies, unfairly subsidizing domestic firms, and manipulating its currency to create a trading imbalance. He also has demanded that Beijing boost imports of U.S. agriculture products, such as soybeans and pork.
Trump has tried to tout the potential economic benefits of any deal to farmers, a key political constituent. He has already authorized close to $30 billion in payments to farmers as a way to relieve some of their financial losses, a controversial step that has little precedent.
One reason financial markets keep jolting up and down in anticipation of the trade talks is because Trump keeps reversing himself without little notice in terms of his approach. He has repeatedly dialed up and then dialed back pressure on Chinese negotiators by announcing new tariffs and then delaying tariffs, sometimes without warning.
Chinese officials have expressed an openness to some changes in their trade relationship with the White House, but they have stopped well short of Trump’s broader demands. There are growing signs that the prolonged standoff is damaging both nations, as economic growth in the U.S. and China have slowed markedly this year.
In recent weeks, Trump has acknowledged that U.S. manufacturing companies are cutting back on investment, but he has blamed that on the Federal Reserve, accusing the central bank of not moving quickly enough to lower interest rates.
Continual posturing by White House and Chinese officials has whipsawed the stock market since trade negotiations began in earnest late last year. Some indexes have spiked or plummeted based solely on rumors or partial developments, as traders or computer algorithms react to anything that might be perceived as news.
“The fact that markets are still trading on China trade talk innuendo is proof positive the algorithms are running the short-term show,” said Nancy Tengler of Tengler Wealth Management. “Those of us who invest our client’s money for the long-term use these bouts of volatility to purchase great companies at a discount and sell expensive holdings to eager buyers.”
All 11 stock market sectors were up in Wednesday’s trading, with information technology and energy at the head of the pack.
“It’s natural that technology is going to rally hard,” said Kenny Polcari, senior market strategist at SlateStone Wealth. “The tech stocks are the highfliers and get hit the hardest on the way down, and they are the ones that bounce the most on positive trade news.”
The Dow’s biggest gainers in late morning activity included Visa, American Express, Microsoft, Intel and Cisco.
Stocks fell sharply Tuesday — the Dow slid more than 300 points, or 1.19 percent — after Washington imposed visa restrictions on Chinese officials and blacklisted several Chinese businesses on allegations their work contributes to the repression of the nation’s Muslim minority population. Since the start of October, Wall Street has bounced between pessimism over weakening U.S. manufacturing data and optimism over record low unemployment.
The Bureau of Labor Statistics reported Wednesday that the number of job openings in August was flat month-over-month at 7.1 million.
“The peak was 7.626 million openings last November, so the labor market may have passed its peak for hiring demand in this business cycle,” said Chris Rupkey, chief financial economist at MUFG Union Bank.
Rupkey said the data shows American companies “still want you to come to work for them … despite the head winds of uncertainty and risks posed by the escalation of the trade war."