Stocks rose on Tuesday as the latest tariffs on U.S. and Chinese goods are not as bad as previously feared. Strong gains in tech also lifted the broader market.
The Dow Jones Industrial Average surged 250 points as Nike and Intel outperformed. The S&P 500 gained 0.8 percent, led by tech and consumer discretionary. The Nasdaq Composite advanced 1 percent as Amazon, Apple, and Alphabet traded higher.
China announced tariffs targeting more than 5,000 U.S. products will go into effect on Sept. 24. However, China will put a 10 percent tariff on some goods it had previously earmarked for a 20 percent levy. The announcement comes after the Trump administration announced the U.S. will impose 10 percent tariffs on $200 billion worth of Chinese imports, and those duties will rise to 25 percent at the end of the year.
“The market is thinking this wasn’t the worst-case scenario,” said Daniel Deming, managing director at KKM Financial. “That’s why you’re seeing this pseudo-rally taking place.”
Deming added that strong gains in Asian markets also lifted investor sentiment. “Once we saw the Asian market had the ability to rally, most of the major indexes across the globe got their cue from that,” he said. The Shanghai Composite rose nearly 2 percent while the Japanese Nikkei gained 1.4 percent overnight.
Commerce Secretary Wilbur Ross said the new tariffs are aimed at modifying China’s behavior and leveling the playing field for U.S. companies there. China is “out of bullets” to retaliate, Ross told CNBC’s “Squawk Box.”
The tariffs from both countries come after multiple news outlets reported U.S. officials were trying to restart U.S.-China trade talks.
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“At least for now, instead of getting us closer to the bargaining table with China, we’ve only pushed them further away as they are likely canceling their trip to the US,” said said Peter Boockvar, chief investment officer at Bleakley Advisory Group.
President Donald Trump tweeted there will be “fast economic retaliation against China” if U.S. farmers, ranchers or industrial workers are targeted.
China has openly stated that they are actively trying to impact and change our election by attacking our farmers, ranchers and industrial workers because of their loyalty to me. What China does not understand is that these people are great patriots and fully understand that…..— Donald J. Trump (@realDonaldTrump) September 18, 2018
…..China has been taking advantage of the United States on Trade for many years. They also know that I am the one that knows how to stop it. There will be great and fast economic retaliation against China if our farmers, ranchers and/or industrial workers are targeted!— Donald J. Trump (@realDonaldTrump) September 18, 2018
The announcements also come after National Economic Council Director Larry Kudlow told CNBC’s Becky Quick that Trump has “not been satisfied” with the trade talks with Beijing.
Caterpillar and Boeing — considered trade bellwethers for their large overseas exposure — rose 2 percent and 2.7 percent, respectively.
Fears of escalating trade tensions between the U.S. and China knocked equities off of record highs set last month. The S&P 500 and Nasdaq set all-time highs to end August. This month, however, both indexes are down 0.4 percent and 2.6 percent, respectively, through Monday’s close.
Tech shares bounced back after steep losses in the previous session. Amazon rose 1.6 percent after posting its worst day since April on Monday. Netflix and Apple, meanwhile, rose 3.5 percent and 0.5 percent, respectively.
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