U.S. Stocks Rally on Tariff Delay

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08/13/2019 | 05:18 pm

By Gunjan Banerji

Stocks, bond yields and commodities jumped Tuesday as news that the U.S. would delay some tariffs against China rekindled investors' hopes for an eventual trade truce.

The U.S. Trade Representative released a statement in Washington that the U.S. would delay and remove items from the roughly $300 billion of Chinese imports facing 10% tariffs on Sept. 1. The news sent investors rushing back into stocks after two days of declines for major U.S. stock indexes and an extended bout of market volatility. They also piled into commodities while shedding exposure to traditionally safer assets such as government bonds and gold.

The S&P 500 advanced 1.6% in midday trading. The Dow Jones Industrial Average jumped more than 400 points, or 1.6% after a sharp decline Monday extended a recent bout of stock volatility. The Nasdaq Composite gained 1.9%.

Optimism about trade rippled through commodities markets and lifted shares of some individual companies. Copper rose after slumping in recent weeks on trade tensions. Brent crude oil gained more than 4%. Caterpillar shares, which have been a bellwether for trade talks, jumped 2.8%.

"In the very short term, this takes a little bit of pressure off," Mike Bailey, director of research at FBB Capital Partners, said of the trade news.

Shares of technology companies outperformed on Tuesday. The S&P 500's information-technology sector advanced about 2.2% in recent trading, making it the best performing of the S&P's 11 sectors. Shares of Micron Technology added 4.2%, while Apple added 3.9%.

Investors' sale of traditionally safer assets like government bonds early Tuesday sent yields higher. The yield on the 10-year Treasury note rose to 1.680% in recent trading, according to Tradeweb, from 1.640% Monday. Gold lost about 0.3%.

Trade tensions between the U.S. and China have rattled markets in recent days, injecting volatility into stock, bond and currency markets. Some analysts said they are expecting more short-term swings, wary that large one-day moves could be quickly reversed in coming days.

"We wouldn't recommend investors making large positions one way or another on equities" at the moment, said Jason Draho, head of Americas asset allocation at UBS Global Wealth Management.

Elsewhere, political turmoil in Italy, where lawmakers are looking to schedule a date for a no-confidence vote in Prime Minister Giuseppe Conte's government, added to worsening sentiment across Europe, driving Italian government 10-year bond yields down to 1.670% in recent trading.

In Europe, the benchmark Europe Stoxx 600 index erased its earlier losses to rise about 0.5%.

The yield on the German 10-year bund fell to minus 0.617%, a record intraday low, after a key survey of business expectations showed a sharp drop in sentiment.

Elsewhere, the selloff in Hong Kong stocks accelerated, with the Hang Seng Index falling 2.1% amid continued political unrest. This week's selloff in Hong Kong stocks meant the Hang Seng Index -- which has lost 11% since the beginning of July, when the protests turned more violent -- has joined Korea's Kospi as the second major global benchmark in negative territory this year.

Steven Russolillo and

Anna Isaac

contributed to this article.

Write to Gunjan Banerji at Gunjan.Banerji@wsj.com

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