U.S. stocks staged an afternoon comeback, rebounding from sharp earlier declines that were fueled by anxiety over the U.S.-China trade spat. The Dow Jones Industrial Average made a steady climb in the afternoon to end the day down 66.47 points, or 0.3%, to 26438.48, after sliding more than 450 points in the morning. The S&P 500 closed down 13.17 points, 0.4%, to 2932.47, and the tech-heavy Nasdaq Composite dropped 40.71 points, or 0.5%, to 8123.29. Still, 10 of the 11 S&P 500 sectors dropped, led by declines in industrials, materials and technology-three areas with heavy exposure to China. President Trump on Sunday threatened to ramp up U.S. tariffs on $200 billion in Chinese imports to 25%, up from the current 10%, putting a potential trade deal between the two countries in doubt ahead of a new round of talks set to begin this week in Washington. Jitters about the trade deal being on rockier ground caused stock markets in Asia and Europe to slide and the Chinese yuan to weaken. U.S. stocks recoiled after markets opened Monday morning, but their rebound is a sign that investors eventually shrugged off the latest threat as potential posturing and were still placing trust in other factors that have boosted markets this year, including a dovish Federal Reserve and solid U.S. economic data. China’s delegation was preparing to go to the U.S. for the talks, the foreign ministry spokesman said Monday, adding that the Chinese government hoped both sides could work together to reach an agreement after tariff threats repeatedly rose in the past. “I’m surprised by the resilience of the market, for sure,” said R.J. Grant, associate director of equity trading at KBW Inc. “The mind-set right now is that the Fed has your back, providing investors who were a bit more nervous last year with a little bit of a renewed sense of protection.” Jitters over the trade dispute had revived worries that tensions would take a toll on corporate profits, undermining strong U.S. growth, some analysts and traders said. The abrupt drops-following months of relative tranquility-showed investors globally are still sensitive about the possibility of deteriorating commercial relations between the world’s two largest economies.
In other commodity news, gold prices inched higher, boosted by declines in stocks and other risk assets after President Trump threatened to escalate the U.S.-China trade fight. Gold for June delivery, the most-active futures contract, edged up 0.2% to $1,283.80 on the Comex division of the New York Mercantile Exchange. Prices are roughly flat for the year and nearly 5% below their February 10-month peaks, hurt by strength in the dollar and renewed faith in the U.S. economy. Even during occasional bouts of market volatility this year, the haven metal has struggled for traction with investors favoring the dollar and U.S. Treasurys, making gold less attractive by comparison, analysts say. However, with stocks around the world tumbling Monday, gold was able to eke out a modest advance. The gain came after prices wobbled for much of the session with the dollar rising. A stronger dollar makes gold and other commodities denominated in the U.S. currency more expensive for overseas buyers. On Monday, the WSJ Dollar Index, which tracks the U.S. currency against a basket of 16 other currencies, advanced 0.2%. Monday’s market swings came after President Trump threatened over the weekend to raise levies on $200 billion in Chinese imports to 25% on Friday from 10%. He also said he would levy 25% duties “shortly” on $325 billion in imports that haven’t yet been taxed. Even though gold climbed Monday, some analysts remain cautious on the haven metal. Some say tariff threats exacerbate fears that economic activity overseas will continue to lag far behind growth in the U.S., a trend that has lifted the dollar in recent months and hurt gold. Elsewhere in precious metals, most-active silver futures fell 0.2% to $14.927 a troy ounce. Platinum added 0.7% to $880.90, while palladium dropped 2.2% to $1,328.10. Among base metals, most-active Comex copper futures closed up 0.4% at $2.8295 a pound, pausing a recent slide despite worries about trade and economic growth in China, the world’s largest consumer of industrial metals.
Iron Ore: 91.08s – 0.30 (May Contract)
Oil prices ended higher on geopolitical worries after the U.S. said it was sending an aircraft carrier and a strike force to the Middle East as a warning to Iran. The rise in oil prices was a rebound from earlier in the session, when crude fell hard on worries that Twitter postings by President Trump might derail a possible U.S.-China trade deal. West Texas Intermediate futures, the U.S. oil benchmark, ended 0.5% higher at $62.25 a barrel on the New York Mercantile Exchange, after falling to as low as $60.31 earlier in the session. Brent crude, the global oil benchmark, ended 0.6% higher at $71.24 a barrel on London’s Intercontinental Exchange. Oil prices began the trading session much lower, dropping to a five-week low of $60.31 a barrel overnight after President Donald Trump on Sunday said continuing trade talks with China were moving too slowly because China is trying to renegotiate. He threatened to raise tariffs on $200 billion in Chinese imports to 25% from the current 10%, starting Friday. But the concerns over the U.S.-China trade deal eased during the New York trading session as investors digested the news and decided it probably doesn’t mean a trade deal is dead yet. Also, at a press briefing on Monday afternoon, Chinese Foreign Ministry spokesman Geng Shuang said China’s trade team was still “preparing to travel to the U.S. for consultations.” That allowed oil investors to turn their attention to the Middle East, and the news that the U.S. is deploying a carrier strike group and a number of bombers to the Middle East to serve as a deterrent to Iran based on new intelligence that suggests allied interests and American forces could be imperiled. “The Tweet from Trump about China trade obviously hit the wires and that caused all commodities including oil, as well as most other asset classes, to fall,” said Kyle Cooper, a consultant at ION Energy. “But the news of the carrier being deployed and the potentially significant supply disruptions it could lead to, pushed oil higher.” Investors were also watching Monday for further developments regarding recent contamination issues with the Druzhba pipeline that is a key avenue for Russian crude-oil exports into Europe. Those pipeline problems have tightened supplies for the global benchmark, Brent, providing some price support, while the U.S. benchmark WTI has moved steadily lower in recent weeks due to U.S. crude inventories that have risen to a 19-month high. As such, the WTI discount to Brent has again widened toward peaks seen in the first quarter near $9 a barrel, which can actually benefit U.S. shale producers as it gives them a price advantage when selling their crude overseas. Analysts said that if the U.S.-China trade talks hit any more hurdles, that could also hurt WTI prices more than Brent, widening the discount on the U.S. benchmark further.
The dollar rose against a number of emerging-market currencies, as renewed trade tensions between the U.S. and China spooked some investors. The U.S. currency was up 0.7% against the South African rand and gained 0.6% against the Brazilian real in late afternoon New York trading, while also rising against a broad range of other emerging-market currencies. President Trump on Sunday threatened to increase U.S. tariffs on $200 billion in Chinese imports to 25%, from the current 10%, putting an accord between the two countries in jeopardy ahead of a new round of talks. Investors tend to pull back from emerging markets during periods of global economic uncertainty. The yen, a popular destination for nervous investors, was up 0.2% against the dollar. Meanwhile, political uncertainty pushed the dollar up nearly 2% against the Turkish lira. Turkey’s national election board canceled results of the Istanbul mayoral race that President Recep Tayyip Erdogan’s ruling party lost five weeks ago and ordered a rerun, state news agency Anadolu said Monday. The WSJ Dollar Index, which measures the U.S. currency against a basket of 16 others, was up 0.2% at 90.67.