U.S. stocks rebounded on Tuesday after China backed down from its threat to devalue its currency in retaliation for President Trump’s tariff hike.
The Dow Jones Industrial Average jumped 311.78 points to close at 26,029.52, a 1.2 percent gain. The S&P 500 rose 1.3 percent. The Nasdaq Composite climbed by around 1.4 percent.
That means stocks recovered nearly half the losses from Monday, when heightened trade tensions sent the Dow down 767 points. The sell-off was triggered by China allowing the yuan to fall to the lowest level in a decade, a move many investors feared was the start of a currency war phase of the trade dispute. After the U.S. Treasury quickly labeled China an official currency manipulator, China signaled that it would not allow or encourage further declines.
Despite the calm in the stock market, the bond market still showed signs of anxiety. Federal-funds futures show traders pricing in a 100 percent probability of another cut in September and a 75 percent chance of another cut in October. The yield on the 10-year Treasury note fell to 1.716 percent from 1.725 on Monday. Bond yields fall as prices rise.
Some of the stocks that were the most beaten down on Monday staged strong comebacks on Tuesday. Nike shares rose by almost 3 percent. Apple shares were up by 1.9 percent.
But not all of the sell-off casualties recovered. Caterpillar and casino-owner Wynn, which sank more than 7 percent on Monday, ended the day flat. Chip-maker Nvidia, which lost 6.45 percent on Monday, rose by just 1 percent.