Wall Street rebounds as investors shrug off latest round of tit-for-tat tariffs

Stocks on Wall Street recovered from early losses to post gains in another volatile session dominated by trade and technology concerns.

Investors absorbed the latest blows in the tit-for-tat trade war between the US and China.

Shares of chip makers, manufacturers and machinery companies initially came under pressure after China unveiled plans for a series of retaliatory tariffs on American goods.

But stocks erased those declines in afternoon trading, as some analysts said knee-jerk selling on worries that protectionist trade policies could slow global economic growth might have been overdone.

At the close, the Dow Jones Industrial Average added 230.94 points, or 1.0%, to 24,264.30, after dropping as much as 510 points in the opening minutes of trading.

The S&P 500 climbed 1.2% to 2644.69 and the Nasdaq Composite gained 1.45% to 7042.11.

Despite initial unease that trade policies could result in higher costs for manufacturers of everything from computer chips to smartphones, leading to a slowdown in corporate activity, some investors said the tariff announcements seem more like negotiating tactics.

“When people think about it a little bit more, they think it’s not done yet, it’s not played out and it’s only affecting a small part of the economy,” says Thomas Martin, senior portfolio manager at Atlanta-based Globalt Investments.

“You do have a lot of skittishness in the market, and people wanting to be on top if there is a change.”

Trade war developments
In the latest developments, the US has revealed a list of 1333 Chinese machinery and materials goods worth $US50 billion that will be hit with 25% tariffs. This in addition to the levies introduced on steel and aluminium last month.

Retaliatory Chinese levies on US pork, wine and fruit went into effect earlier this week.

US companies have 30 days to submit comments on the latest list. This gives them the opportunity to raise concerns and to note if goods crucial to business – such as highly specialised machine tools – have been targeted, or if different goods should be included in the tariff list.

The Chinese, meantime, have put together another list of 106 categories that has 25% levies also on $US50 billion worth of goods such as soybeans, cars and aircraft.

China has indicated it wants to limit the damage of such moves and coninute talks to resolve trade issues.

“Both sides have put their lists on the table,” Vice Finance Minister Zhu Guangyao says. “Now it’s time for negotiations.”

Impact on stocks
Boeing was among the biggest decliners, falling 1%. Tractor maker Deere dropped 2.9%.

Recent trade worries have come as unease over stricter regulation and data privacy have dragged down highflying technology and internet stocks that led the market higher in recent months.

Facebook shares fell 0.7% after it was confirmed chief executive Mark Zuckerberg would appear at a House Committee hearing to answer questions on the firm’s handling of user data on April 11.

The company also said Facebook information of up to 87 million people, more than initially reported 50m, may have been improperly shared with an analytics firm tied to President Donald Trump’s 2016 campaign.

Meanwhile, some investors are still concerned that too much of the market’s gains in recent years has been concentrated in a few stocks. 

Microsoft ,Nvidia and the so-called FAANG stocks of Facebook, Amazon.com, Apple, Netflix and Google parent Alphabet are responsible for roughly half the market’s gains since the 2013 “taper tantrum,” says Barry Bannister, head of institutional equity strategy at Stifel Nicolaus.

“That’s a pretty narrow market. We’re seeing several things come together at one time. It’s not just trade tensions.”

Tech selloff eases
Still, widespread selling of big technology and internet stocks has moderated, with the S&P 500 information technology sector adding 1.4%.

The first-quarter earnings season begins in earnest next week, giving investors hope robust profit growth will give stocks a boost.

Home builder Lennar and motor vehicle retailer CarMax were among the best performers in the S&P 500 after reporting earnings.

The yield on the benchmark 10-year US Treasury note edged up to 2.788% from 2.784% on Tuesday. 

The Stoxx Europe 600 fell 0.5%. France's CAC 40 fell 0.2%, Germany's DAX dropped 0.4% and the UK's FTSE 100 gained 0.05%. 

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