Wall Street recovers from sharp losses sparked by China tariffs

By Sinead Carew

NEW YORK (Reuters) - U.S. stocks were higher in afternoon trading on Wednesday, with the major indexes recovering from earlier losses as investors' fears eased over a trade conflict between the United States and China.

Beijing hit back against U.S. plans to impose tariffs on $50 billion in Chinese goods, with proposals for a list of similar duties on key American imports including soybeans, planes, cars, beef and chemicals.

However, investor concerns appeared to ease after Trump's top economic adviser Larry Kudlow said the administration was involved in a "negotiation" with China rather than a trade war.

The market also seemed to take comfort from the fact that the effective date of China's move depends on when the U.S. action takes effect and Washington has a two-month window for public comment and consultation.

 

Omar Aquilar, Chief Investment Officer at Charles Schwab in San Francisco, said equity investors may have reacted too soon as fixed income and currency markets appeared unperturbed by the exchange between China and the United States.

If currency and fixed income investors are not concerned, "that tells you a lot about what the implications might be," said Aquilar, adding that even if the tariffs actually happen it would be a few quarters before they would hurt revenue.

The S&P opened below its 200-day moving average, a key technical level, but inched above as the session progressed, and by afternoon was in positive territory, joined by the Nasdaq and then the Dow.

At 2:43 p.m (1843 GMT), the Dow Jones Industrial Average <.DJI> rose 86.19 points, or 0.36 percent, to 24,119.55, the S&P 500 <.SPX> gained 14.44 points, or 0.55 percent, to 2,628.89 and the Nasdaq Composite <.IXIC> added 48.12 points, or 0.69 percent, to 6,989.40.

Despite big swings in stocks, trading activity in U.S. equity options was muted as expectations for strong corporate earnings quelled the urge to load up on contracts that benefit from a surge in market volatility. The Cboe Volatility Index <.VIX>, the most widely followed barometer of expected near-term volatility for the S&P 500, was down 0.13 point at 20.97.

Boeing and Caterpillar were still the biggest drags on the Dow due to their exposure to China, but well off their session lows by late afternoon. Boeing was last down 2 percent while Caterpillar was down 0.7 percent.

The S&P 500's industrials sector <.SPLRCI> also pared losses but was still down 0.2 percent in late afternoon trading.

The technology sector <.SPLRCT> turned positive and was last up 0.6 percent, helped by Apple which turned positive and was last up 1.5 percent.

China's tariffs on U.S. soybean exports led to bets that higher domestic reserves would lower food costs for meat producers such as Tyson Foods , Hormel , Sanderson Farms and Pilgrim's Pride , helping those stocks.

Lennar jumped 9.3 percent to lead the percentage gainers on the S&P after the homebuilder reported quarterly revenue that beat estimates as it sold more homes at higher prices.

Advancing issues outnumbered declining ones on the NYSE by a 1.33-to-1 ratio; on Nasdaq, a 1.98-to-1 ratio favored advancers.

The S&P 500 posted one new 52-week high and eight new lows; the Nasdaq Composite recorded 30 new highs and 89 new lows.

(Additional reporting by Saqib Iqbal Ahmed and Herbert Lash in New York and Sruthi Shankar in Bengaluru; Editing by Patrick Graham and James Dalgleish)