Market Snapshot: Stocks trade higher as investors look past intensifying U.S.-China trade fight


U.S. stocks rose Tuesday as investors looked past escalating trade tensions to instead focus on an economy that remains strong by many measures. The gains were led by consumer discretionary and technology shares, two sectors that had slumped in the previous session.

Where are the major benchmarks trading?

The Dow Jones Industrial Average DJIA, +0.73% rose 160 points, or 0.6%, to 26,221. The S&P 500 index SPX, +0.65%  advanced 20 points, or 0.7%, to 2,909 and the Nasdaq Composite Index COMP, +0.94% climbed 89 points, or 1.1%, to 7,984.

Stocks had declined Monday, marking the biggest one-day drop for the S&P since mid-August and the worst session for the Nasdaq since late July.

What’s driving trading?

President Donald Trump late Monday said he would impose new tariffs on about $200 billion in Chinese goods. He also threatened additional penalties as part of his campaign to pressure Beijing to change its commercial practices.

In response, China retaliated with tariffs of 5% to 10% on $60 billion worth of U.S. products that will take effect Sept. 24 and said it may introduce more measures if the U.S. goes ahead with higher tariffs, according to The Wall Street Journal.

Read: Trade war’s ‘nuclear option’ could be bad for Apple, Amazon: strategist

Trade issues have been a headline risk for months, and while it has increased day-to-day volatility, the broad indexes have largely ground higher, supported by strong growth in corporate earnings and improving economic data.

In Europe, European Central Bank President Mario Draghi urged eurozone governments to take further action to shore up the region’s banking sector, including creating a common insurance plan for bank deposits.

What are analysts saying?

“Though this was a move anticipated by many analysts, the [tariff] announcement will nevertheless disappoint investors who were hoping for a thaw in trade tensions,” said Mihir Kapadia, chief executive officer of Sun Global Investments. “It remains to be seen how China will retaliate, but despite the muted response of global stock markets this morning, investors might be bracing themselves for further trade conflict fueled volatility in the markets.”

“The escalation was no surprise. Indeed, equity market responses were muted. Looking ahead, prospects for significant progress towards de-escalation in the short term are low. The Trump team does not seem eager to end the conflict. It is confident that the US can ‘win’ the trade war. This means that it will not easily consider concessions by China enough to let the conflict de-escalate,” said Louis Kuijs, head of Asia economics at Oxford Economics, in a note.

What stocks are in focus?

Tesla Inc. TSLA, -3.44%  shares sank 5.8% after Bloomberg reported that the electric car company is under investigation by the Justice Department over tweets from Chief Executive Elon Musk last month that he is thinking about taking the company private.

Shares of Oracle Corp. ORCL, +0.40%  fell 0.4% a day after the software company reported quarterly revenue that missed expectations, hurt by weaker-than-expected cloud-services sales.

Visa Inc. V, +0.90%  and Mastercard Inc. MA, +1.64% agreed to settle a class-action lawsuit brought by U.S. retailers in 2005. Shares of Visa rose 1% while Mastercard rose 1.9%.

General Mills Inc. GIS, -7.54%  slumped 7.9% after it reported revenue below forecasts even though adjusted first-quarter earnings beat expectations.

AutoZone Inc. AZO, -2.33% fell 3.1% after it reported adjusted fourth-quarter earnings that beat expectations while revenue came in below forecasts. Same-store sales also grew less than had been expected.

Red Hat Inc. RHT, -1.01%  shares fell 0.4% after it was downgraded to neutral by JPMorgan analysts.

Viking Therapeutics Inc. VKTX, +89.78%  surged 77% after it reported positive results in a midstage trial of a treatment for nonalcoholic fatty liver disease.

What are other markets doing?

Asian stocks rallied as investors shrugged off the latest news on tariffs. However, the region has struggled lately, and recently traded at four-year lows. Major European indexes were mostly higher.

Crude-oil CLK9, +1.00%  prices rose sharply and gold GCM9, -0.24%  edged lower. The U.S. dollar index DXY, +0.17%  was generally flat.

Providing critical information for the U.S. trading day. Subscribe to MarketWatch’s free Need to Know newsletter. Sign up here.