Dow rises 150 points as Trump tech-related crackdown on China is less strict than feared
Stocks rose on Wednesday as a crackdown on Chinese tech investments by the Trump administration was less restrictive than expected.
The Dow Jones Industrial Average traded 150 points higher, with Chevron as the best-performing stock in the index. The S&P 500 gained 0.6 percent, with energy outperforming. The Nasdaq composite advanced 0.5 percent.
Shares of chipmakers Micron Technology, Advanced Micro Devices and Nvidia all rose at least half a percent. Dow components Caterpillar, Apple and Boeing all climbed more than 0.8 percent.
The government will rely on the newly strengthened Committee on Foreign Investment in the United States to deal with concerns about foreign purchase of sensitive domestic technologies, a senior administration official said Wednesday.
Reports earlier in the week suggested that the White House would more actively restrict investment in technology firms by Chinese companies, but instead it appears it will rely on CIFUS. Treasury Secretary Steven Mnuchin told CNBC’s “Squawk Box” that the department can block U.S.-China ventures if there is technology transferred, however.
“Clearly, this was not as onerous as people thought,” said Marc Chaikin, CEO of Chaikin Analytics. “I think investors have to stay the course and ignore the headlines.”
“We’ve got a mercurial president that says one thing but could very quickly change his mind or do something different,” Chaikin said.
Prior to the administration’s announcement, stock index futures had fallen sharply, with Dow futures indicating steep losses for the open. Futures immediately recovered following the announcement.
Markets around the world have been on a roller-coaster ride in recent weeks as fears around trade tensions between the U.S. and other major economies escalate. Not only is the U.S. in a tit-for-tat war of words with China on tariffs, but now the European Union is involved.
Last week, President Donald Trump threatened a 20 percent tariff on all car imports from the EU. He added that if the EU chose not to remove its duties on American vehicles, then the U.S. would have no choice but to act on those levies.
Economists and experts have raised concern about tariffs slowing down the U.S. economy. However, Mnuchin said he is expecting a “big” GDP number for the second quarter. He noted Wednesday on “Squawk Box” that: “We have an economy that is here because of the president’s tax plan and the president’s regulatory relief and we always said trade is part of this.”
Energy stocks rose more than 2 percent as oil prices added to their strong gains from Tuesday. Crude rose 1.6 percent to $71.68 per barrel a day after the State Department ordered companies who import Iranian oil to reduce those imports to zero by November.