Wall Street took a breath and recovered slightly from Monday’s loses. The intervention of the People’s Bank of China, which set a higher rate for the yuan, also improved the investors’ sentiment.
The blue-chip index Dow Jones Industrial Average added 312 points to its value, or 1.2%, to 26,030 points. The S&P 500 advanced by 1.3% to 2,882 points, while the technology Nasdaq Composite rose by 1.4% and reached a level of 7,833 points.
The CBOE Volatility Index, which measures the implied volatility of S&P 500 options, was down 17.97% to 20.17.
Stabilization in the US-China trade war will be the most important factor in the markets. If the escalation continues, it will lead to new declines no matter what the Federal Reserve does. On Tuesday, the People’s Bank of China set an official reference rate for the Chinese currency above the key threshold of 7 yuan for the dollar. The move has eased currency markets, which were initially shaken by fears that the US-China trade war is turning into a currency war.
On Monday, US markets experienced their worst day since the beginning of the year. Dow Jones wiped out 767 points, while S&P 500 dropped by nearly 3% and Nasdaq Composite sank more than 3%.
The sale-offs began last week when US President Donald Trump announced the introduction of new tariffs on Chinese imports. The reaction of the markets became even more negative yesterday when the Chinese authorities allowed the yuan to reach its lowest level against the dollar for over ten years.
Again yesterday, the US Treasury Department identified China as a currency manipulator, which has been happening for the first time since Clinton’s administration. Previously, Trump used Twitter to voice his views on currency movements.
China also confirmed earlier reports that it is freezing purchases of US agricultural goods. The US-China trade war has been underway since last year, lowering attitudes and prospects for corporate profits and economic growth.
White House economic adviser Larry Kudlow told that Trump is still open to negotiating US-China trade deal, which would bring flexibility on the customs issue.
US government bonds lost ground on Tuesday. Market watchers explain this with the opposition, as the recent escalation in the China-US trade conflict has sparked a thirst for a secure investment.
In addition, falling US bond prices are also explained by the rise in stock prices in New York. After the indices suffered their biggest daily loss of the year the previous day, they went up on Tuesday.
Two-year bonds fell by 2/32 points to 100 9/32 points and their return is 1.61%. Five-year bonds lost 3/32 points to 101 points and their profitability amounts to 1.54%. The leading 10-year bonds shrank by 6/32 points to 105 25/32 points with a return of 1.73%. The 30-year long-term bonds fell by 3/32 points to 113 9/32 points with a return of 2.26%.
Corporate stocks performance
Apple’s shares rebounded on Tuesday, adding 1.89%. The best performing component of the blue-chip index, however, was the sports goods maker Nike, which gained 2.95%.
The shares of fertilizer maker Mosaic have plunged following disappointing statements over the last quarter report by over 6%. In addition, competitor K+S reduced its annual adjusted earnings per share target.
The stocks of International Flavors & Fragrances (IFF) saw a similar trend of more than 15% decline after competitors Symrise and Givaudan presented their interim financial reports and narrowed their revenue outlook.
In contrast, Take-Two Interactive reported an increase of almost 8%. The computer game developer has a strong quarter behind it and has raised its perspective. Recently, stocks like Activision Blizzard and Electronic Arts have been on sale following critical remarks by US President Trump about video game makers following the attacks in the US states of Texas and Ohio. Activision and Electronic Arts recovered by about 2% on Tuesday.
Ford shares added 2.6%. Morgan Stanley analysts upgraded their rating for the automaker to Overweight.
Walt Disney shares rose about 2.57% before reporting quarterly earnings.
The top performers on the S&P 500 were Transdigm Group Incorporated (+13.67%), Take-Two Interactive Software Inc (+7.96%) and Zoetis Inc (-7.64%), while on the flipside were International Flavors & Fragrances Inc (-15.95%), Mosaic Co (-6.69%) and Mylan NV (-5.94%).