US stocks climb amid signs of a thaw in US-China trade war

Alex Veiga
Associated Press
Monday's rally  on the NY Stock Exchange got its start early after President Donald Trump claimed China was willing to reopen talks in the trade dispute.

Technology and communications companies led stocks broadly higher on Wall Street Monday afternoon as cautious optimism about the potential for progress in the costly trade war between the U.S. and China put investors in a buying mood.

The gains reversed some of the indexes' hefty losses from last Friday, when jitters over another escalation in the trade dispute roiled the market, contributing to its fourth straight weekly loss.

Monday's rally got its start early after President Donald Trump claimed China was willing to reopen talks in the trade dispute. Investors rolled with the positive implications of the president's claim, even after China's foreign ministry said that it didn't know what Trump was talking about.

Uncertainty remained high about the next developments in the conflict, which has repeatedly seen the sides attempt to negotiate before ending in acrimony and more tariffs and trade penalties.

"It always seems that Trump, after he does something to freak the market out or escalate this trade war, he tries to dial it back to some degree," said Brad Bernstein, senior portfolio manager at UBS Wealth Management USA. "As an investor, you just have to know there's a lot of uncertainty and there is no clarity in the short term right now."

Big technology companies, which do a lot of business in China and have much riding on the outcome of the trade dispute, were among the biggest gainers. Apple climbed 1.7% and Microsoft rose 1.3%.

Communications services and health care stocks also contributed to the gains as the market clawed back some of its heavy losses from last week.

The S&P 500 was up 0.7% as of 3:41 p.m. Eastern Time. The Dow Jones Industrial Average gained 180 points, or 0.7%, to 25,808. The Nasdaq, which is heavily weighted with technology stocks, rose 1%.

Bond prices fell, which pushed up the yield on the 10-year Treasury to 1.55% from 1.52% late Friday.

Major indexes in Germany and France closed higher. Markets in Britain were closed for a national holiday. In Asia, Hong Kong's Hang Seng and Japan's benchmark Nikkei 225 closed lower.

Stock markets have been volatile this summer as traders have been whipsawed by the turns in the trade war between the world's biggest economies.

The conflict escalated once again on Friday, after China announced new tariffs on $75 billion in U.S. goods. Trump responded angrily on Twitter, at one point saying he "hereby ordered" U.S. companies with operations in China to consider moving them to other countries, including the U.S.

Trump also later announced that the U.S. would increase existing tariffs on $250 billion in Chinese goods to 30% from 25%, and that new tariffs on another $300 billion of imports would be 15% instead of 10%.

The new round of tariff threats caused a sell-off on Friday that erased more than 600 points from the Dow. Global markets appeared headed for another wave of selling early Monday, when indexes in China closed sharply lower, until Trump said his trade negotiators had received two "very good calls" from China on Sunday.

Ben Phillips, chief investment officer at EventShares, credited Monday's market bounce on investors buying back in after a big sell-off more than on real optimism over the long-running trade conflict.

"Every time you have a big down day like that you expect the following day to be a little bit of a recovery bounce that is more bouncing on the sell-off than it is on anything happening today," he said.

Another thing that investors may have to gird themselves for is more sharp turns in the trade negotiations.

"There's not a clear strategy on trade, that's what the market is coming to terms with," Phillips said. "That's what Friday showed us. The market is getting worried about emotions running high in the White House and less logic."