Dow panics, then softens as China tensions ease

US stocks took a deep sigh of relief Friday after President Trump’s tough talk toward China did not include the announcement of any new tariffs.

The Dow Jones industrial average slid as much as 368.97 points, or 1.4 percent, to 25,031.67 ahead of Trump’s 2 p.m. news conference. That index closed down only 17.53 points, at 25383.11, a 0.07 tumble.

The S&P 500 was up 14.58 points, to 3044.31, a 0.48 percent bump, while the Nasdaq was the day’s biggest mover, jumping 120.88 points, or 1.29 percent, to close at 9489.87.

Trump’s announcement was expected to add heat to the simmering battle between the world’s two largest economies and throw some cold water on the stock market’s recent rally. Instead, Trump announced that the US will no longer fund the World Health Organization and would eliminate Hong Kong’s special relationship status after Beijing’s intensified incursion into that city.

Both of those moves were baked in as Trump has been threatening the WHO for months and Secretary of State Mike Pompeo determined earlier this week that Hong Kong was no longer sufficiently autonomous from China.

“The world needs answers from China on the virus. We must have transparency. Why is it that China shut off infected people from Wuhan to all other parts of China?” Trump said from the White House Rose Garden.

“There’s a fear that it leads to a mounting escalation of tensions between the US and China,” said Quincy Krosby, chief market strategist for Prudential Financial. “The concern is that this could lead to an abrupt shutdown of the phase-one trade agreement.”

Those fears were not realized Friday.

“That was partially a relief rally,” said Lindsey Bell, chief investment strategist for Ally Invest. “The market was expecting something much worse related to the trade deal but there wasn’t a lot to chew on by the end. Just a big dip for people to buy into.”

Wall Street has staged a comeback from its coronavirus-fueled crash over the past two months as states started to ease lockdowns aimed at getting the pandemic under control. The S&P closed Thursday just 10.7 percent below its all-time high reached in February.

Now that markets have shrugged off the possibility of a trade war being reignited with China as the country reopens from the pandemic, analysts expect more days of green ahead.

“Investors’ optimism returned after a week where some of the economic data has gotten less terrible,” said Bell.

With Post wires

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