Market closes higher as trade fight grows

Timothy Nick (right) works with fellow traders on the floor of the New York Stock Exchange on Wednesday. Stocks opened sharply lower on Wall Street, but the markets recovered later in the day as fears of an escalating trade dispute between the U.S. and China ebbed.
Timothy Nick (right) works with fellow traders on the floor of the New York Stock Exchange on Wednesday. Stocks opened sharply lower on Wall Street, but the markets recovered later in the day as fears of an escalating trade dispute between the U.S. and China ebbed.

Stocks rose Wednesday in a roller-coaster trading session during which investors were whipsawed by updates on an escalating trade dispute between the United States and China.

The S&P 500 index climbed 30.24 points, or 1.2 percent, to 2,644.69, an upbeat end to a session that started with a nearly 1.5 percent decline driven by jitters of worsening trade tensions between the world's two largest economies.

Stocks reversed course after Larry Kudlow, President Donald Trump's newly installed director of the National Economic Council, sought to play down the risks of an outright trade war in late-morning comments to reporters.

The Dow Jones industrial average advanced 230.94 points, or 1 percent, to 24,264.30, after a swing of more than 700 points. . The Nasdaq composite rose 100.83 points, or 1.5 percent, to 7,042.11. The Russell 2000 index of smaller-company stocks gained 19.51 points, or 1.3 percent, to 1,531.66.

"The most likely outcome is smoke, but no fire," said Bill Adams, senior international economist at PNC Financial. "The amount that both countries have invested in bilateral trade cooperation and economic cooperation is so significant that the costs of going back would be very painful, and more than either country would want to bear."

Washington and Beijing have announced a series of tariffs and counter-tariffs in recent days, with China saying Wednesday that it planned to impose some $50 billion in import duties on soybeans, cars, chemicals and other goods from the United States.

The moves came in response to Trump's recent decision to place tariffs on steel, aluminum, aircraft parts, flat-screen televisions and other products from China, which he has long accused of engaging in unfair trade practices.

Investors initially seemed willing to discount the possibility of a trade war, perhaps in the belief that the Trump administration's protectionist talk would fade amid negotiations through traditional channels. But the tit-for-tat tariffs rolled out by the United States and China could be stripping away some of that confidence.

"The scale and speed of Mr. Trump's actions would have been difficult to predict at the start of the year," analysts at Deutsche Bank said in a note to clients Wednesday before U.S. markets opened. "The growth outlook is more uncertain than it was."

Boeing, which delivered one-fourth of all its planes to China last year, fell as much as 5.7 percent early on and finished with a loss of $3.38, or 1 percent, at $327.44.

Adams, of PNC Financial, said the tariffs would be especially painful for companies in agriculture: machinery makers in the United States would pay more for imported components, and they wouldn't sell as much food in China because their products would be more expensive. He said that will stir up political pressure against the trade sanctions.

Farm equipment maker John Deere lost $4.47, or 2.9 percent, to $148.57, after an early drop of 6.2 percent. Futures for soybeans, a big U.S. export to China, fell 2.2 percent on the Chicago Board of Trade.

However Adams said that there was good news for food producers, as the Chinese government proposed duties on imported beef, but not pork or chicken. Tyson Foods Inc. closed up $1.61 at 71.54, a 2.3 percent rise. Hormel jumped $1.65, or 4.8 percent, to $35.87.

The latest volley between the United States and China has mostly involved advanced manufacturing technologies, a dispute that parallels the countries' fight over steel and aluminum. The overall value of the duties at issue is small given that total trade between the two countries amounts to about $650 billion a year. But economists and investors say the tensions could increase quickly, and that the tariffs could become more punishing.

The growing tensions have helped erode many of the stock market gains that Trump had touted since taking office. The Dow Jones industrial average has slipped to its lowest level of the year in recent days, despite generally positive economic growth around the world and tax legislation in the United States that has helped bolster corporate profits.

The trade dispute is also rippling into global commodities markets. Cotton prices fell 2.9 percent and soybean prices dropped 2.2 percent Wednesday.

Analysts at Goldman Sachs said China's imposition of tariffs on soybeans, an agricultural staple in Midwestern swing states, was a sign of worsening friction between Washington and Beijing.

"We view the inclusion of soybeans in today's announcement as political in nature and reflective of the escalation of the trade dispute with the United States," Goldman Sachs commodities analysts said in a note to clients.

Despite the volatility in stock trading, there was little sign of a rush to the safety of U.S. Treasury bonds. Instead of falling sharply -- a signal of a panicky market -- yields on 10-year Treasury notes were largely stable, finishing the day at 2.78 percent.

RELATED ARTICLE

http://www.arkansas…">China tariff pitch hits back at U.S.

Business on 04/05/2018

Upcoming Events