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US stocks jump as investors reassess trade war risk

Apr 05 2018 07:53

New York - Wall Street stocks finished solidly higher on Wednesday after a rocky start as investors shifted from fearing an imminent US-China trade war, to resuming a wait-and-see approach.

The Dow Jones Industrial Average finished with a gain of 1.0% at 24 264.30, after opening the session more than 2% in the red.

The broad-based S&P 500 gained 1.2% to 2 644.69, while the tech-rich Nasdaq Composite Index jumped 1.5% to 7 042.11.

US stocks opened sharply lower after China unveiled plans to hit major US exports such as soybeans, cars and small aircraft with retaliatory tariffs, which seemed to portend a worsening tit-for-tat conflict between the world's two biggest economies.

But US equities soon began a gradual climb back towards flat and then eventually finished well above the starting level, led by consumer and technology stocks.

Some analysts pointed to comments by recently-installed White House economic advisor Larry Kudlow who suggested President Donald Trump's strident approach to China was a negotiating tactic to win concessions.

"I think at the end of this whole process, the end of the rainbow, there's a pot of gold," Kudlow told Fox Business.

The market's swoon was "probably an overreaction," said Art Hogan, chief market strategist at Wunderlich Securities.

Investors are hoping Trump's execution of the China tariffs mirrors his handling of steel and aluminum tariffs, which were announced with harsh rhetoric but later watered down with exemptions.

"The market is hoping that, much like steel and aluminum, this is part of a negotiating tactic and we find a middle ground," Hogan said.

David Levy, portfolio manager at Republic Wealth Advisors, said, "The market is in a 'sell first and ask questions later' mentality right now."

Most of the Dow finished in positive territory, with Home Depot, Microsoft and Nike all winning more than two percent.

Tech shares mostly climbed, with biotechnology companies such as Amgen, Biogen, Celgene and Gilead Sciences all gaining more than two percent.

An exception was Facebook, which dropped 0.7% after disclosing that data from as many as 87 million users were improperly shared with British political consultancy Cambridge Analytica, far greater than the 50 million previously estimated.

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equities  |  wall street  |  markets
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