Wall Street’s three major domestic equity indexes staged a comeback to close around one percent higher on Wednesday, as investors turned their focus to earnings and away from a trade conflict between the United States and China that wreaked havoc in earlier trading.
After investors fled equities in the morning due to proposed retaliatory tariffs from China, their concerns about a potential trade war eased by the afternoon after Trump’s top economic adviser Larry Kudlow said the administration was in a “negotiation” with China rather than a trade war.
The markets were comforted by the fact that any tariffs would not take effect immediately, if at all. Strategists also cited the S&P’s bounce above a key technical support level and said they expect equities to rise further around the first quarter earnings season, due to start in mid-April.
The S&P opened below its 200-day moving average, a key technical level, but inched above it as the session progressed, and by afternoon it was in positive territory.
The turnaround marked the first time the S&P had showed gains for two consecutive days since early March.
Despite big swings in stocks, trading activity in 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 closed down 1.04 points at 20.06.
The technology sector rose 1.4 percent with only two of its stocks ending the day in negative territory.
Facebook was pummeled on the news that its chief executive would testify before Congress over its data privacy scandal. However, the shares closed well off itheir session low with a 0.6 percent drop to $155.10.
Boeing was the largest drag on the Dow due to its exposure to China, as its shares ended the day well off their session lows with a one percent decline to $327.44 after falling as low as $311.88.
Farm machinery company Deere ended the trading day down 2.9 percent at $148.57 as it could be hurt by China tariffs if its customers’ exports are curbed.
After being a laggard for much of the session, the S&P 500’s industrials sector turned positive late in the day to close 0.4 percent higher.
Approximately 7.04 billion shares changed hands on the major domestic equity exchanges, as compared to a 7.3 billion share average for the past 20 trading days.