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Stocks rally after their drop, helped by trade-war optimism

New York Stock Exchange
Stocks rose Monday, regaining some of the ground lost in Friday’s drop.
(Mark Lennihan / Associated Press)

Stocks on Wall Street closed broadly higher Monday as investors found reason to be cautiously optimistic again about the potential for progress in the costly trade war between the United States and China.

The gains reversed some of the major stock indexes’ hefty losses from last Friday, when jitters over the latest escalation in the trade dispute roiled the market and contributed to its fourth consecutive weekly loss.

Monday’s rally got its start early after President Trump said his negotiators had received encouraging calls from China on Sunday.

China’s foreign ministry denied knowledge of any such calls, but that — and the fact that attempts to negotiate in the trade war have repeatedly ended in acrimony and more tariffs and trade penalties — did not wipe out investors’ willingness to bid stocks higher.

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Big technology companies, which do a lot of business in China and have much riding on the outcome of the trade war, accounted for a big share of the gains. Apple climbed 1.9% and Microsoft advanced 1.5%.

“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.”

The Standard & Poor’s 500 index climbed 31.27 points, or 1.1%, to 2,878.38. The Dow Jones industrial average climbed 269.93 points, or 1.1%, to 25,898.83. The Nasdaq, which is heavily weighted with technology stocks, advanced 101.97 points, or 1.3%, to 7,853.74.

The Russell 2000 index of smaller companies climbed 16.52 points, or 1.1%, to 1,476.

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The major indexes are each on track for losses of 3% or more in August. It has been a volatile month for the market as investors try to gauge whether trade conflicts and slowing economies around the world will drag the United States into a recession.

Along the way, traders have been whipsawed by the turns in the trade war between the United States and China, the world’s biggest economies.

The conflict escalated again Friday: China announced new tariffs on $75 billion worth of U.S. goods, and Trump responded angrily on Twitter, at one point saying he “hereby ordered” U.S. companies with operations in China to consider moving those operations to other countries. Trump later announced that he would increase existing tariffs on $250 billion worth of Chinese goods to 30% from 25%, and that new tariffs on an additional $300 billion worth of imports would be 15% instead of 10%.

The new round of tariff threats caused a sell-off 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.

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Trump expressed his optimism about China hours after he sent mixed messages on the tariff war. He at first seemed to express regret Sunday over escalating the trade dispute, but the White House later said his only regret was that he didn’t impose even higher tariffs on China.

The White House announced weeks ago that China’s negotiating team was expected in Washington in September to continue the discussions.

Ben Phillips, chief investment officer at EventShares, credited Monday’s market bounce to investors buying back in after a big sell-off more than to real optimism over the trade war.

“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.

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Analysts say investors should expect 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.”

Communications services and healthcare stocks also contributed to Monday’s gains. Dish Network climbed 3.9%. Bristol-Myers Squibb rose 3.3%.

Bond prices fell, which sent the yield on the 10-year Treasury up to 1.54% from 1.52%. Higher yields push up interest rates on mortgages and other consumer loans, which helped drive up bank stocks. Bank of America shares rose 1.2%.

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Benchmark crude oil fell 53 cents to $53.64 a barrel. Brent crude oil, the international standard, fell 64 cents to $58.70 a barrel. Wholesale gasoline fell 2 cents to $1.62 a gallon. Heating oil fell 3 cents to $1.79 a gallon. Natural gas rose 8 cents to $2.23 per 1,000 cubic feet.

Gold fell 30 cents to $1,526.30 an ounce. Silver rose 22 cents to $17.62 an ounce. Copper rose 1 cent to $2.54 a pound.


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