US stocks stage massive comeback, Dow rallies 700 points from the low

  • US stocks rebounded from a 510-point drop on Wednesday, surging more than 700 points off its daily lows.
  • Major US indexes saw deep losses in early trading on Wednesday as newly announced China tariffs spooked investors amid escalating fears of a global trade war.
  • Follow the Dow Jones industrial average.

US stocks rallied in afternoon trading, reaching positive territory after plummeting earlier amid reports that China is planning to retaliate against the US in an escalating trade conflict that has investors around the world on edge.

China will impose tariffs on more than 100 American products with a combined trading value of over $US50 billion. The nation wasted no time firing back, making their announcement just hours after President Donald Trump made similar proposals on Chinese products.

The more tech-heavy Nasdaq 100 – which has been a lightning rod for market volatility in recent weeks – plunged as much as 2.1% before closing 1.6% higher. Meanwhile, the benchmark S&P 500 rose 1.2% after dropping as much as 1.6%, while the 30-company Dow Jones industrial average erased a 510-point decline to trade 1% higher.

Investor nerves were eased mid-day after Larry Kudlow, Trump’s top economic advisor, told Fox Business that the brewing trade war with China will end in a “pot of gold.” He also told reporters that the tariffs may not even go into effect, as they are part of a negotiating tactic.

In addition, one of the stock market’s most trusted strategies was in full effect by the afternoon hours. That would be the tactic called “buy the dip,” which refers to when investors see equity weakness as an opportunity to build exposure at discount prices.

The S&P 500 in particular fought to climb back above its 200-day moving average, which was breached on a closing basis this week for the first time in 20 months. It succeeded. In addition, all major US indexes face a tough road to recovery since they will be without their most trusted safety net.

Elsewhere in global equity markets, the Shanghai Composite lost 0.2% after climbing as much as 0.9% in early trading, while the Stoxx Europe 600 slipped as much as 1.3% before finishing down 0.5%.

In the bond market, the 10-year US Treasury yield rose two basis points, to 2.80%, close to the key 3% level that traders are watching. Bank of America Merrill Lynch has said a trade war could move yields higher in the medium-to-long term.

Here’s a rundown of other asset classes:

Check out Business Insider’s in-depth coverage of the market’s recent turbulence:

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