The S&P 500 broke back into the green Wednesday, buoyed by Bank of America and Morgan Stanley's blockbuster earnings reports. Ongoing concerns about U.S.-China trade negotiations and a government shutdown weighed on investor sentiment but took a backseat to enthusiasm over a better-than-expected start to earnings season.
The Dow Jones Industrial Average ended the day little changed, down just 17.15 points, or 0.04% at 46,253.31. At one point in the day, the 30-stock index rose as much as 422.88 points. The S&P 500 finished 0.4% higher at 6,671.06, after gaining as much as 1.2% intraday. The Nasdaq Composite finished up 0.7% at 22,670.08. It briefly rallied as much as 1.4%.
Stocks earlier in the day got a boost from strong earnings out of Bank of America and Morgan Stanley. Bank of America shares closed up 4.4%, while Morgan Stanley's ended the session 4.7% higher.
"It appears as if the banks have hit the ball out of the park, exceeding both earnings and revenue expectations," Sam Stovall, chief investment strategist at CFRA Research, told CNBC. "That's an indication that the economy remains strong and, coupled with the likelihood that the Fed will cut rates again at the end of this month, [it] is bolstering investor optimism."
But the recent pick-up in volatility persisted. Investors have been on edge in recent days as global trade tensions have escalated. The Cboe Volatility Index (VIX), known to many as Wall Street's fear gauge, peaked higher in the afternoon, finishing at 20.6. The index has trended higher over the past week, rising last Friday to more than 21.6, or its most elevated level since late May.
High-flying AI stock Nvidia rolled over to trade 0.1% lower by the closing bell after rising as much as 2.7%.
The S&P 500 on Tuesday attempted a comeback but ultimately closed lower after President Donald Trump threatened China with a cooking oil embargo late in the session as retaliation for Beijing not buying U.S. soybeans. Earlier, Trump also threatened to place an additional 100% tariff on any goods coming from China in response to Beijing imposing strict export controls on rare earth minerals.
But the recent stock market volatility stoked by the trade war hasn't discouraged federal officials from pursuing tough talks with China, Treasury secretary Scott Bessent said Wednesday.
"We won't negotiate because the stock market is going down," Bessent said in an exclusive interview at CNBC's Invest in America Forum. "We will negotiate because we are doing what is best economically for the U.S."
The U.S. government shutdown, which is in its third week, has added to the uncertainty of the moment. Under the closure, the release of critical economic data from federal agencies has come to a halt indefinitely, creating blind spots for traders.
"Investors don't appear ready to send equities back to fresh records at this juncture, as they await more earnings reports and commentary from Washington or Beijing, prior to traveling north," said Jose Torres, senior economist at Interactive Brokers. "Volatility levels remain elevated, and that signals the potential for abrupt moves in either direction as participants look for any important news that could influence sentiment and risk-taking behavior as a result."
