Tech Stocks Lead Wall Street Recovery Following Worst Trading Day of 2019
The U.S. stock market rallied along with gold on Tuesday, as risk assets stabilized following the worst trading day of 2019. The rally came as media outlets reported that China was taking steps to stabilize the yuan after letting it slide to 11-year lows on Monday.
Dow, S&P 500, Nasdaq Bounce Back
All of Wall Street’s major indexes were trading higher by the mid-morning thanks to a large uptick in technology stocks. The S&P 500’s information technology index jumped 1%. The closely-related communication services sector climbed 0.9%.
The large-cap index was last up 0.4%a t 2,856.86.
The Dow Jones Industrial Average rallied as much as 229 points through the early-morning session. It was last up 81 points, or 0.3%, at 25,798.89.
Surging technology stocks helped the Nasdaq Composite Index recover. The tech-laden average was last up 0.7% at 7,777.77.
Stock-market volatility also declined on Tuesday, with the CBOE VIX falling 11%. The so-called “fear index” posted an intraday spike of 105% on Monday and closed at its highest level of the year. VIX normally trades inversely with the S&P 500 Index.
Gold traded in a more volatile range on Tuesday, but still managed to pull ahead by the late morning as risk-off traders looked for a reliable hedge against the U.S.-led trade war.
December gold futures, the most actively traded contract, reached a high of $1,486.80 a troy ounce on the Comex division of the New York Mercantile Exchange, the highest in over six years. The yellow metal was last up $6.10, or 0.4%, at $1,482.60 a troy ounce.
Bullion is up $50 since the start of the month and has returned nearly 16% year-to-date.
Precious metals, U.S. Treasuries and bitcoin surged on Monday as global equity markets plunged.
China escalated its trade war with the United States on Monday after the central bank allowed the yuan to slide against the dollar. The yuan fell beyond the key 7-per-dollar level for the first time in 11 years, prompting President Trump to declare China a “currency manipulator.”
The yuan tumbled further on Tuesday, but has apparently stemmed its decline, a sign that the People’s Bank of China (PBOC) was taking measures to stabilize the currency. For investors, this offers hope that China is willing to negotiate with the United States following the latest flare-up.
President Trump reignited the trade war last Friday by announced new tariffs on $300 billion worth of Chinese imports. He also criticized Beijing for not following through on its promise to purchase more U.S. agricultural goods.
The new China tariffs, which amount to 10%, will go into effect on September 1.
Featured image courtesy of Shutterstock. Charts via Yahoo Finance and Barchart.com.