Investing.com - U.S. stocks rebounded strongly Tuesday after China stabilized its currency and investors snapped up bargains.
The market gained back roughly 40% of what it lost on Monday when stocks suffered their worst one-day losses of the year.
The S&P 500, down 3% on Monday, gained back 1.33% on Tuesday. The Dow Jones Industrial Average, which fell 767 points Monday, rose more than 1.22%. The Nasdaq Composite was up 1.39% after falling 3.5% on Monday.
At first, the impetus fwas China announcing it would value its currency, the yuan, at 7 to the dollar. The government let the yuan slump Monday against the dollar to retaliate against President Donald Trump's decision to impose 10% tariffs on Chinese goods imported into the United States starting Sept. 1.
Both decisions, plus a U.S. announcement that it was branding China a currency manipulator, were clear signals that optimism early in the year that a new trade deal was close was unfounded. Now the worry is the trade fight would extend well into 2020, bringing with it the prospect of more painful market volatility.
Twenty-four of the 30 Dow stocks were higher, along with 87 stocks in the Nasdaq 100 index, which was up 1.4%. On Monday, all of the stocks in both indexes finished in the red.
The market was led by strength in technology stocks, especially Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), Facebook (NASDAQ:FB) and Google parent Alphabet (NASDAQ:GOOGL). In addition, consumer stocks such as Nike (NYSE:NKE), Lululemon Athletica (NASDAQ:LULU )and Ulta Beauty (NASDAQ:ULTA) were winners.
The only weak spots in the market were energy and materials stocks.
Oil prices were lower, a byproduct of the trade fight. West Texas Intermediate crude fell 1.94% to $53.63 a barrel and is down 8.45% in August. Brent crude, the global benchmark, settled at $58.94, down 1.45%. It's dropped 9.6%, mostly on the worries over the U.S.-China trade fight.
Among the losers in the energy sector were BP (NYSE:BP), Chesapeake Energy (NYSE:CHK), Halliburton (NYSE:HAL) and Schlumberger (NYSE:SLB).
Chemical stocks slumped. Dow Inc. (NYSE:DOW) hit a 52-week low. U.S. Steel (NYSE:X) and Alcoa (NYSE:AA) also moved lower.
The rally was almost a guarantee after Monday's selloff because technical levels, such as relative strength indexes, dropped so low so fast as to signal -- loudly -- that much of the stock market had become undervalued.
The major averages had been drifting lower since hitting record highs on July 25 and you don't know how markets will perform going forward -- especially with the trade fight continuing.
A worry for Wednesday's market as well may be an earnings disappointment after the market closed from Dow component Walt Disney (NYSE:DIS).
Disney blamed the disappointment on the costs of integrating the 21st Century Fox business acquired earlier this year in a $71.3 billion deal. Disney shares were off 2.5% after hours after rising 2.6% in regular trading.
Disney's movie business (what it calls studio entertainment) saw a 33% revenue increase, thanks to the success of such blockbuster film as "Avengers: Endgame."
Earnings are due Wednesday from companies including Booking Holdings (NASDAQ:BKNG), LYFT (NASDAQ:LYFT) and Overstock.com (NASDAQ:OSTK).
Winners and Losers in the S&P 500
Aerospace component manufacturer Transdigm Group (NYSE:TDG), software developer Take-Two Interactive Software (NASDAQ:TTWO) and Zletis, maker of medicines and pharmaceuticals, were among the top S&P 500 performers for the day. Zoetis was spun out of Pfizer (NYSE:PFE) in 2013.
International Flavors & Fragrances (NYSE:IFF), fertilizer maker Mosaic (NYSE:MOS) and generic drug maker Mylan NV (NASDAQ:MYL) were among the S&P 500 laggards.