From Fred Imbert: Stocks traded higher on Tuesday on news that the U.S. temporarily eased restrictions on Chinese telecom giant Huawei.
The Commerce Department said Monday night it would allow Huawei to purchase American-made goods in order to maintain existing networks and provide software updates to existing Huawei handsets until Aug. 19. The move sought to minimize disruption for the telecom company’s customers around the world.
“That’s another ray of hope that we can avoid the worst-case scenario,” said Art Hogan, chief market strategist at National Securities. “The market tends to be seizing on the positive undertones in trade.”
“It felt like they needed to show some flexibility in the administration,” Hogan said. “A week ago Sunday, it seemed like we were heading into no-man’s land on trade.”
Shares of chipmakers like Micron Technology, Qualcomm and Xilinx all rose more than 2%. Nvidia and Lam Research gained 2.1 and 2%, respectively.
Chinese stocks rose broadly on the news. The Shanghai Composite gained 1.2% while the Shenzhen A Shares index jumped 1.8%. European shares also traded higher as the Stoxx 600 index advanced 0.4%.
The administration’s move comes nearly a week after the Trump administration said U.S. companies would need a license to do business with Huawei. This was seen as an escalation in the ongoing trade war between China and the U.S.
Both countries recently hiked tariffs on billions of dollars worth of imports, sending ripples through financial markets.
The S&P 500 and Dow are both down more than 3% in May, while the Nasdaq had lost 4.9% through Monday’s close. Among S&P 500 sectors, only real estate was up for the month.
Trade tensions are not going away any time soon. Chinese President Xi Jinping signaled there would be no end to the trade war in the near future. Last week, CNBC learned that scheduling talks regarding trade negotiations had stalled.
Kohl’s shares plunged 12% after reporting weaker-than-expected earnings. J.C. Penney also dropped 9.1% following the release of its quarterly numbers.
–CNBC’s Sam Meredith contributed to this report.
The SPDR Dow Jones Industrial Average ETF Trust (DIA) was trading at $258.01 per share on Tuesday morning, up $1.34 (+0.52%). Year-to-date, DIA has gained 5.17%, versus a 7.74% rise in the benchmark S&P 500 index during the same period.
This article is brought to you courtesy of CNBC.