Brendan McDermid | Reuters
Traders work on the floor of the New York Stock Exchange, October 30, 2018.
Tuesday’s moves come as several officials from the world’s two largest economies continue talks to resolve their ongoing trade dispute. U.S. Commerce Secretary Wilbur Ross told CNBC on Monday that both global powers could reach a settlement “they can live with, and that addresses all the key issues.”
China’s Foreign Ministry previously said Beijing had “good faith” to work with Washington to reach an agreement before a March deadline.
President Donald Trump also tweeted on Tuesday that U.S.-China trade talks are “going very well.”
Strategists at MRB Partners said in a note the U.S.-China trade situation is setting itself up for a more benign outcome than had been previously expected.
“The U.S.-China power struggle will persist for years, but both economies are now slowing and neither government has the latitude to pursue policies that could threaten to trigger a global recession,” they said. “The Argentina handshake will morph into a near-term truce.”
However, investors are still grappling with an ongoing U.S. federal government shutdown that started over a disagreement on funding for a wall along the U.S.-Mexico border. Trump is scheduled to deliver a prime-time address Tuesday night and is expected to focus on the standoff over his proposed border wall that has shut down large chunks of the federal government.
Bank shares struggled, however. J.P. Morgan Chase fell 0.2 percent, along with Wells Fargo and Bank of America. The losses came after Jefferies downgraded J.P. Morgan, citing the possibility of no rate hikes from the Federal Reserve.
Chipmakers also fell. Nvidia and Applied Materials fell 2.5 percent and 4.05 percent, respectively. Lam Research also slipped. The decline in chip stocks came after Samsung slashed its fourth-quarter earnings guidance due to lackluster demand for memory chips.
“Apple and Samsung warnings are important as they signal tighter margins, less pricing power and increased competition,” said Larry Benedict, founder of The Opportunistic Trader. “This affects more than these giants.”
“We are not optimistic here,” Benedict added.
contributed to this report.