By Mark DeCambre, MarketWatch
Information technology and communication services stocks lead the market higher
U.S. stocks finally rallied Tuesday after six days of declines and following the biggest losing day so far this year on Monday.
Stocks with business in China such as Apple, Micron Technology and Nike that were big losers on Monday led the gains Tuesday.
Investors took fright Monday as China allowed the yuan to slump to its lowest level in a decade after President Donald Trump's threat last Thursday to impose 10% tariffs against an additional $300 billion of imported Chinese goods, effective Sept. 1.
How did benchmarks perform?
The Dow Jones Industrial Average rose 311.78 points, or 1.2%, to end at 26,029.52, while the S&P 500 index climbed 37.03 points, or 1.3%, to close at 2.881.77, powered by a rally by the information technology (XLK) and communication services (XLC) sectors, while the Nasdaq Composite Index surged 107.23 points, or 1.4%, to finish at 7,833.27.
On Monday, stocks had their worst day of the year , with the Dow shedding more than 767 points. The Dow ended the day down 2.9%, at 25,717.74, while the S&P 500 declined 87.31 points, or 3%, to close at 2,844.74. The Nasdaq Composite shed 278.03 points to finish at 7,726.04, a decline of 3.5%.
What's driving the market?
Traders were encouraged by China's central bank moving to restrain the fall in its currency with a fix Tuesday at 6.9683 yuan. A breach of the 7-to-the dollar level on Monday, interpreted by some as an intentional weakening of its currency, helped to ignite a global stock market selloff and slump in bond yields.
"A more market-friendly China fix provided the first signal that the [People's Bank of China] is having a second thought about weaponizing the yuan," said Stephen Innes of VM Markets in Singapore. "However, the fix is ambiguous enough to keep two-sided interest alive while still conveying a message to U.S. trade hawks that in no uncertain terms will China be a pushover if trade talks ever resume."
China's move overnight to restrain the fall in its currency came despite the decision late Monday by the U.S. Treasury Department to label China a currency manipulator for the first time since 1994, opening the door to new sanctions and ratcheting up already high trade tensions into a possible currency war also.
"In pulling the yuan higher it is not only looking to manage any decline, but also looking to contain any damage in terms of confidence in their stewardship of the Chinese currency and economy," wrote Michael Hewson, chief market analyst at CMC Markets U.K., in a daily research note.
However, doubts remain about the durability of the more optimistic complexion of Tuesday's trade.
"This move by China may have brought investors a brief respite after several days of selling but it remains to be seen whether today's move is emblematic of a short term base, or just merely the precursor to a dead cat bounce," Hewson wrote.
In a CNBC interview Tuesday morning, chief White House economic adviser, Larry Kudlow, said Trump still wants a trade deal and the U.S. plans to host Chinese negotiators in September, but China has to make concessions. Kudlow claimed the U.S. has the upper hand in the trade dispute with China because "the U.S. economy is very strong, theirs is not."
In economic news, job vacancies fell slightly to 7.35 million in June according to the U.S. Labor Dept's JOLTS report Tuesday morning.
St. Louis Federal Reserve President James Bullard said he has one more interest-rate hike "penciled in" for 2019, speaking at National Economic Club in Washington .
Before that statement, Bullard separately told Agence France Press on Tuesday in an interview that the Fed "can't realistically move monetary policy in a tit-for-tat trade war." Bullard is a member of the rate-setting Federal Open Market Committee.
Which stocks are in focus?
SeaWorld Entertainmentreported Tuesday a second-quarter profit that beat expectations although revenue came up short, while revenue per guest rose above analyst projections. Shares fell 1.4%.
Icahn Enterprises L.P.(IEP), activist investor Carl Icahn's firm, on Tuesday reported $2.19 billion in revenue in the second quarter, down from $3.42 billion in revenue a year earlier. Shares ended 2.4% higher.
Shares of Regeneron Pharmaceuticals rose after the company reported second-quarter earnings that beat analysts' expectations.
Shares of Dean Foods plummeted more than 36% after the milk-and-dairy products seller reported a wider-than-expected second-quarter loss and sales that rose less than analyst projections, amid volume pressure and an "accelerated decline" in the conventional white milk category.
What other assets are in focus?
The U.S. 10-year Treasury note yield rose just 0.2 basis point to 1.740% on Tuesday after hitting 1.738% late Monday, which had marked its lowest close Oct. 7, 2016, according to Dow Jones Market Data.
Gold for December delivery extended its climb to a sixth straight session.
Oil futures prices closed sharply lower Tuesday -- including a roughly seven-month low for international benchmark Brent -- as contracts gave up early gains once the stock market pared its recovery. Oil fell as questions persisted over global demand for energy, uncertainty that's tied to U.S. tensions with major trade partners. U.S. oil futures fell 1.9% to $53.63 on the New York Mercantile Exchange.
Overnight Monday, Asian and European stocks had followed U.S. equities lower. Japan's Nikkei 225 Index fell 0.7%, Hong Kong's Hang Seng Index fell 0.7%, while the CS1 300 index dropped 1.1% . The pan-European Stoxx 600 ended 0.5% lower.