Trade war? What trade war?
Wall Street shrugged off the escalation of a trade dispute between the world’s two largest economies Friday after the U.S. imposed tariffs on billions in Chinese goods and China responded in kind.
After a wobbly start, U.S. stocks were moving broadly higher, placing the market on track for a weekly gain after two weeks of losses.
The market’s reaction suggests investors are betting that Washington and Beijing will work out a deal before their trade dispute begins to weigh on corporate profits and the global economy.
“Who would have thought? The first shots of the trade war, and yet the markets are still amazingly resilient,” said Erik Davidson, chief investment officer at Wells Fargo Private Bank. “The market is counting on this to subside. If they get an indication that this will continue to escalate, that will cause some problems.”
The S&P 500 index rose 25 points, or 0.9 percent, to 2,761 as of noon Eastern Time. The Dow Jones Industrial Average rose 145 points, or 0.6 percent, to 24,501. The Nasdaq composite added 92 points, or 1.2 percent, to 7,678. The Russell 2000 index of smaller-company stocks picked up 14 points, or 0.8 percent, to 1,693.
The S&P 500 posted two consecutive weekly declines heading into this week as investors worried over rising global trade tensions. That effectively means the market had already priced in, or accounted for, the risks of a stepped-up trade conflict.
The U.S. slapped a 25 percent tax on $34 billion worth of Chinese imports. China retaliated with taxes on an equal amount of U.S. products, including soybeans, pork and electric cars, calling the move the start of the “biggest trade war in economic history.”
Though the first exchange of tariffs is unlikely to inflict much economic harm on either