The S&P 500 staged a big comeback from its lows on Tuesday, but gave a lot of it back again before the closing bell as U.S. and China traded blows in a renewed trade feud. President Donald Trump criticized China for not buying soybeans late in the day, a comment that pushed the S&P 500 into the red to finish the session.
The S&P 500 closed down 0.2% to 6,644.31 in a wild day that saw the benchmark fall as much as 1.5% and gain 0.4% at its highs. The Nasdaq Composite was off by 0.8% to 22,521.70, although at one point it had fallen as much as 2.1%.The Dow Jones Industrial average closed up 0.4%, or 202.88 points, to 46,270.46 after gaining nearly 1% at one point. It was lower by 1.3% initially shortly after the open. Caterpillar led the gains in the Dow.
Stocks opened the day lower after China overnight moved to tighten its grip on global shipping, adding fuel to an already volatile global trade backdrop. China imposed sanctions on five of South Korea's Hanwha Ocean's U.S. subsidiaries. This will forbid organizations and individuals in China from doing business with the affected companies. The move, the Chinese government said, aims at strengthening China's security.
U.S. Trade Representative Jamieson Greer then told CNBC Tuesday that it depends on China's next actions if the 100% additional tariffs threatened by Trump go into effect Nov. 1. Greer reiterated that the tariffs could be implemented even sooner.
The major indexes shook off the morning losses and the S&P 500 traded well into the green for most of the session.
But Trump hit China late Tuesday again on Truth Social, saying the country is choosing to not buy U.S. soybeans in "an economically hostile act." He also threatened to consider "retribution" such as a cooking oil embargo. Stock indexes pulled back from their highs into the close following Trump's post with the S&P 500 ultimately closing lower.
"It's just not clear what the off-ramp is as we head into the month's end for China and the U.S. when it comes to trade tensions, and I think that's something the market is still trying to deal with," said Rob Haworth, senior investment strategy director at U.S. Bank Wealth Management. "That's some of what's driving market sentiment now, even though ... the earnings reports this morning tell us the financial sector appears to be doing well and the consumer appears still healthy."
Tech stocks such as Nvidia remained under pressure as they did during Friday's rout. However, a strong start to the earnings season served as an encouraging sign that fundamentals remain strong for the market. Citigroup and Wells Fargo rose 3.9% and 7.2%, respectively, on better-than-expected earnings. JPMorgan and Goldman also beat estimates, but they fell slightly.
Trade tensions have been rising since late last week, when President Donald Trump threatened to place an additional 100% tariff on Chinese imports, sending stocks sharply lower. The Dow on Friday lost more than 800 points, while the S&P 500 posted its biggest one-day loss since April 10.
On Sunday, however, Trump dialed back his rhetoric, noting in a Truth Social post: "Don't worry about China, it will all be fine."
That comment sent stocks soaring on Monday. The S&P 500 and Dow each jumped more than 1% on the day, marking the former's biggest one-day gain since May 27. The Dow had its best day since Sept. 11 and broke a five-day losing streak. Monday's rebound retraced more than half of the S&P 500's decline on Friday, and two-thirds of the Dow's steep losses.
The Cboe Volatility index — Wall Street's so-called fear gauge — rose above Friday's closing level at one point, signaling renewed angst on Wall Street that there will be no easy solution to this China trade fight and hedging for future losses using options may make some sense. The VIX hit a high above 22, which was also a four-month high. It ended the day at 20.81.