U.S. Stocks Erase Most of an Early Loss as Volatility Surges

Stocks overcame a big loss on Wall Street Wednesday, though the market’s recovery left plenty of signs of worry among investors that the fallout from the trade war between the U.S. and China will spread.

A late-afternoon rally lifted most of the major stock indexes out of the red, reversing most of the early slide that briefly pulled the Dow Jones Industrial Average down more than 580 points. Technology and consumer staples stocks powered much of the gains, offsetting losses in banks, energy companies and other sectors.

Even so, the moves in the bond and commodities markets signaled that investors are nervous that the escalating trade war between the U.S. and China may derail the global economy.

Bond yields sank around the world, something that happens when investors see a weaker economy and low inflation on the way. The price of oil tanked and the price of gold shot up to its highest level in six years as traders sought safe-haven holdings.

The S&P 500 index eked out a gain of 2.21 points, or 0.1%, to 2,883.98. The index had been down 2% during the heaviest bout of selling.

The Dow dropped 22.45 points, or 0.1%, to 26,007.07. It had been down as much as 589 points.

The Nasdaq led the market’s upward swing, climbing 29.56 points, or 0.4%, to 7,862.83. The Russell 2000 index of smaller companies lost 1.40 points, or 0.1%, to 1,500.69.

The market has been roiled the past couple of weeks by growing anxiety as the U.S. and China clash over trade.

China stabilized the yuan on Tuesday and that helped lift U.S. stocks a day after they endured their worst day of the year. But the markets turned volatile again early Wednesday after central banks in New Zealand, India and Thailand cut key interest rates. The surprise rate cuts triggered a slide in bond yields around the world as investors scrambled for safety.

The yield on the 10-year Treasury touched its lowest level in nearly three years, falling as low as 1.60% from 1.74% late Tuesday, before climbing back to 1.73%. It was above 3% in late November.

Corporate earnings, meanwhile, have been coming in better than expected.

Still, the bond market continues to flash a signal of recession. The gap between the yield on the three-month Treasury and the 10-year Treasury widened further.

A three-month Treasury was yielding 0.28 percentage points more than a 10-year Treasury as of Wednesday afternoon. It was 0.36 points earlier in the day, the widest gap since the spring of 2007, less than a year before the Great Recession.

Banks sustained some of the worst losses Wednesday. Lower bond yields mean lower interest rates on mortgages and other kinds of loans, which mean lower profits for banks. JPMorgan Chase fell 2.2%.

The dimming expectations for global growth also send the price of crude oil down $2.54, or 4.7%, to settle at $51.09 a barrel. Brent crude fell $2.71 to $56.23 a barrel.

Wholesale gasoline fell 7 cents to $1.62 per gallon. Heating oil declined 7 cents to $1.75 per gallon. Natural gas fell 3 cents to $2.08 per 1,000 cubic feet.

Gold rose $34.90 to $1,507.30 per ounce, silver rose 75 cents to $17.16 per ounce and copper rose 2 cents to $2.57 per pound.

The dollar fell to 105.69 Japanese yen from 106.52 yen on Tuesday. The euro strengthened to $1.1234 from $1.1200.