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Stocks rally amid signs of softening trade tensions, tech rebound

U.S. stocks rose Tuesday amid more positive sentiment surrounding future trade relations and indications that the Federal Reserve would step in to help support the economy amid ongoing global tensions. Meanwhile, big tech stocks stemmed declines after concerns of a regulatory crackdown sent shares sinking Monday.

The S&P 500 (^GSPC), rose 2.14%, or 58.72 points, as of market close, with the tech sector leading advances. The Dow (^DJI) rose 2.06%, or 510.97 points, while the Nasdaq (^IXIC) rose 2.65%, or 194.1 points.

Republican lawmakers are reportedly considering efforts that could include a vote to block President Donald Trump’s planned new tariffs on Mexico, according to multiple news outlets.

Last week, Trump said he would be slapping tariffs starting at a rate of 5% on all imports from Mexico in a move aimed at pressuring the country to crack down on migrants trying to cross the border. The announcement sent stocks tumbling late last week as investors weighed the potential impact to companies with operations south of the border, with automakers especially exposed.

Officials from Mexico are set to meet with U.S. Trade Representative Robert Lighthizer on Tuesday, after having met with the U.S. Secretaries of Agriculture and Commerce on Monday.

The escalation of tensions with Mexico added another spoke to a multi-prong trade war between the U.S. and its major trade partners.

China, which has been a focal point of trade concerns, has sent mixed signals about the path toward a resolution. A spokesperson for China’s Ministry of Commerce spokesperson said Tuesday that further talks would be required to resolve the dispute between the two countries.

However, China’s Ministry of Foreign Affairs on Tuesday issued a safety warning for Chinese citizens and companies in the U.S., and the Ministry of Culture and Tourism issued a travel warning for tourists traveling to the U.S., each through the end of the year.

The Ministry of Culture and Tourism noted, “The frequent occurrence of shootings, robberies and theft in the United States recently” as cause for concern. In response to whether the move was related to the trade dispute with the U.S., ministry spokesperson Geng Shuang said it was due to “current circumstances,” according to Bloomberg.

Elsewhere, traders on Tuesday have been monitoring signals from Federal Reserve officials as to the direction of future monetary policy. Half of this year’s voting members of the Federal Open Market Committee are scheduled to speak at a conference in Chicago Tuesday and Wednesday to evaluate their means of targeting the Fed’s dual mandate of achieving price stability and maximum employment.

On Tuesday, Fed Chair Jerome Powell said the central bank would respond “as appropriate to sustain the expansion” amid current concerns weighing on the economy, including the global trade war.

“To be sure his comments are vague, but I think it’s safe to say this is the first time Powell himself has opened the door to an actual rate cut. Given the ongoing uncertainty on the both the interest rate and trade front, any clarity will likely be welcomed by the market,” Mike Loewengart, vice president of investment strategy at E-Trade Financial Corporation, said in an email. “A lot of market watchers will be reading the tea leaves from this week’s jobs data, which could hold significant weight for the Fed’s next rate move.”

Powell’s remarks come amid a month of trade-related financial market volatility, softening domestic economic data and below-target inflation signals. Earlier this week, St. Louis Fed President James Bullard suggested these factors may provide justification for a cut to key interest rates “soon.”

As of Tuesday afternoon, markets were pricing in a 97.9% probability of at least one rate cut by the Fed’s December meeting, according to CME Group.

STOCKS

Shares of Google-parent Alphabet (GOOG), Facebook (FB), Apple (AAPL) and Amazon (AMZN) jumped after concerns of increased regulatory scrutiny sent tech stocks tumbling on Monday. Multiple news outlets reported that the Department of Justice and Federal Trade Commission – which share oversight of antitrust and anticompetitive concerns – had delegated authority to investigate the practices of the big tech companies, with the DOJ overseeing Alphabet’s Google and Apple, and the FTC overseeing Amazon and Facebook.

Shares of Google parent company Alphabet were down over six percent on Monday, following news reports that the U.S. Department of Justice is preparing to launch an anti-trust investigation aimed at Google. (Photo by Drew Angerer/Getty Images)

“We do not believe Justice and the FTC have launched antitrust investigations into these companies,” JPMorgan analyst Doug Anmuth wrote in a note Tuesday. “However, allocating responsibilities between the two agencies significantly increases the likelihood, and The WSJ suggests that Google (DOJ) and Facebook (FTC) may be the biggest priorities.”

Tiffany (TIF) shares fell after the company missed sales expectations in the first quarter. Total comparable same-store sales for the jeweler fell 2% in constant currency, versus a decline of 1.2% anticipated, and revenue of $1.00 billion missed expectations by $20 million. Comp sales in the Americas fell 4% year-over-year, below expectations for a 2.1% decline, while comp sales in the Asia Pacific region were flat, versus expectations for a 1.3% decrease. The company said the first-quarter top-line decline in the Americas was due to lower spending by foreign tourists.

ECONOMY

New factory orders declined by 0.8% in April, the Census Bureau reported Thursday, coming in slightly ahead of economists’ consensus expectations for a 1.0% decline. However, March’s reading for new orders of U.S.-made goods was downwardly revised to just a 1.3% increase, from a 1.9% rise seen previously. Excluding transportation orders, factor orders rose 0.3% in April, matching March’s downwardly revised rate.

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck

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