Traders Gregory Rowe, left, and Daniel Kryger, center, work with specialist Mario Picone on the floor of the New York Stock Exchange, Tuesday, Aug. 6, 2019. Stock markets turned higher on Tuesday as China stabilized its currency after allowing it to depreciate against the dollar in response to President Donald Trump's decision to put more tariffs on Chinese goods. (AP Photo/Richard Drew)

US stocks claw back lost ground as China stabilizes currency

August 06, 2019 - 3:44 pm

Technology and bank companies helped drive stocks broadly higher on Wall Street Tuesday as the market regained its footing a day after posting its biggest decline of the year.

The bounce came as investors welcomed China's decision to stabilize its currency, easing some of the pressure in its trade war with the U.S. The move suggests Beijing might hold off from aggressively allowing the yuan to weaken as a way to respond to U.S. tariffs on Chinese goods.

News that China allowed its currency to depreciate against the dollar to its lowest level in 11 years sparked Monday's steep stock market sell-off, knocking the S&P 500 down 3%. The benchmark index had made up about a third of those losses in late-afternoon trading Tuesday.

"We're getting a nice move here, but if you look at what the tone of the market might be for the next few days it still could be under some pressure," said Jeff Kravetz, regional investment director for U.S. Bank Wealth Management. "Right now investors are quite nervous and the reason for the nervousness is not only the trade issue, but we're also seeing weakening economic data, not only here, but overseas."

Technology stocks, which bore the brunt of Monday's sell-off, accounted for a big share of the market's broad gains Tuesday. Apple rose 1.7% and Microsoft added 1.6%. The companies get significant revenue from China and have been highly sensitive to swings in the ongoing trade dispute.

Financial companies also helped lift the market. Wells Fargo gained 1.4% and Bank of America rose 1%.

Retailers and health care and communications services companies also notched solid gains. Foot Locker rose 3.1% and Merck added 1.1%. Facebook added 1.5%.

Industrials also rose. Aircraft components maker TransDigm jumped 14.2% after raising its profit forecast and delivering solid quarterly earnings.

Energy stocks dropped along with the price of crude oil. Materials sector stocks also fell.

A government report suggesting a cooling U.S. job market kept bond yields in check after an early gain. The yield on the 10-year Treasury briefly rose to 1.77%, but then declined to where it stood a day earlier at 1.73%.

Solid earnings results helped lift other sectors. Animal health company Zoetis climbed 7.2% and led health care stocks higher.

KEEPING SCORE: The S&P 500 index was up 1.1% as of 3:37 p.m. Eastern time. The Dow Jones Industrial Average rose 250 points, or 1%, to 25,967. The Nasdaq composite gained 1.3%. Stock indexes in Europe fell.

ANALYST'S TAKE: Investors are growing more anxious as the U.S. and China increase their trade war from a simmer to a boil and threaten global economic growth.

"What's really come into the market and spooked investors is the sense that the stakes are rising again," said James McCann, senior economist at Aberdeen Standard Investments.

The lingering trade dispute is looming over closely interconnected supply chains and other economies risk becoming collateral damage. Investors should be focusing on the trade dispute's impact on the broader economy, including industrial production, along with business investment and sentiment, McCann said.

UNDER SCRUTINY: Novartis fell 2.9% after the Federal Drug Administration disclosed that it is reviewing the accuracy of data on Zolgensma, a drug for treating spinal muscular atrophy in children. Novartis is the parent company of AveXis, which makes the drug. Several other drugmakers also fell. Mallinckrodt tumbled 14.4%, McKesson dropped 5.4%, AmerisourceBergen slid 6.1% and Teva Pharmaceuticals slumped 10.8%.

TOO BLAND: International Flavors & Fragrance tumbled 15.9% after the company trimmed its forecast following a disappointing earnings report. Profit and revenue came in below Wall Street forecasts during the second quarter. Its key food ingredients unit recorded a sales decline.

DRIVING GROWTH: Take-Two Interactive Software jumped 8.6% on a surge in sales of "Grand Theft Auto" and other popular video games. The company, which also makes the "Red Dead Redemption" games, beat Wall Street's fiscal first quarter profit forecasts and gave investors a surprisingly good sales forecast for the current quarter.

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AP Business Writer Damian J. Troise contributed to this report.

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