Stocks rebound as hopes rise that trade tensions will ease
Stocks closed higher for the first time in five days on renewed optimism that an all-out trade war can be averted even after the U.S. decision to slap fresh tariffs on Chinese goods overnight.
While a late-day push sent the S&P 500 into positive territory, the bellwether still finished down on the week by the most since just before Christmas. Ten of the 11 industry sectors gained after all started the day in the red. U.S. and Chinese officials wrapped up high-level trade talks on Friday, lacking a deal yet avoiding a breakdown in negotiations even after President Donald Trump boosted tariffs on $200 billion in goods and threatened to impose more.
“I believe this is the “end game” for the negotiations,” said Bryce Doty, senior vice president at Sit Investment Associates, which has about $13 billion in assets under management. “Both sides are making a show of resistance as they get closer and closer to a final deal.”
The market fell sharply in the early going when negotiators failed to reach a deal. Hours later, remarks from Trump and Treasury Secretary Steven Mnuchin gave investors reason for optimism.
First, Mnuchin told CNBC that the trade talks had been “constructive,” which spurred the market’s rebound. Then, in a late-afternoon tweet, Trump suggested the tariffs could be removed and that the trade talks “will continue.”
The afternoon pickup led to a broad reversal in the market, leaving only health care stocks with a loss. Still, the buying did little to blunt the overall sharp decline for stocks this week. The benchmark S&P 500 index finished with its worst weekly loss of the year, 2.2%.
“Nobody wants to sell too aggressively just in case things get settled and the market rallies,” said J.J. Kinahan, chief market strategist for TD Ameritrade. “As long as they’re still talking there’s a chance that this gets done.”
With China yet to specify how it will retaliate against U.S. duties, investors stumbled to the end of a bruising few days after seeing almost $600 billion in equity market value wiped out. The U.S. gave its bottom line in talks in Washington, saying Beijing had three to four weeks more to reach a deal before the Trump administration acts again.
“Everything that people thought was going to happen is now back on the table and dirty laundry is all over the place,” said Yousef Abbasi, director of U.S. institutional equities and global market strategist at INTL FCStone. “That’s the scenario we face.”
Associated Press and Bloomberg News contributed.