US stocks rally to claw back lost ground

News that the US and China are open to negotiating to avert a trade war put investors in a buying mood on Monday, giving the market its best day in more than two years and erasing about half of its huge losses last week.

Technology companies accounted for much of the broad rally, which powered the Dow Jones industrial average to a gain of nearly 670 points.

Microsoft was the biggest gainer in the 30-company Dow and the Standard & Poor’s 500 index, climbing nearly 8%.

Banks also notched solid gains, benefiting from a pick-up in bond yields. Retailers, consumer goods companies and health care stocks were among the big gainers.

The market rebound followed the worst week for US stocks in two years as investors traded last week’s jitters for a more optimistic outlook on trade, and an opportunity to buy.

“Certainly nothing’s settled,” said Rob Haworth, senior investment strategist at US Bank Wealth Management. “Investors are still viewing this as a glass half-full market and a constructive economy, so it’s not surprising to see them buy on value here, buy on dips to try to rebuild their positions.”

The Standard & Poor’s 500 index rose 70.29 points, or 2.7%, to 2,658.55. The Dow Jones industrial average gained 669.40 points, or 2.8%, to 24,202.60, after losing more than 1,400 points last week and is still down slightly for the year.

The Nasdaq added 227.88 points, or 3.3%, to 7,220.54, and the Russell 2000 index of smaller-company stocks picked up 33.63 points, or 2.2%, to 1,543.72.

All told, the Dow, S&P 500 and Nasdaq posted their best one-day gains since August 2015, making up slightly more than half of the market’s losses on Thursday and Friday.

Global stock markets fell sharply last week amid fears of a trade war after President Donald Trump announced duties on 60 billion dollars of Chinese goods in a dispute over technology policy.

On Friday, Beijing released a 3 billion dollar list of US goods targeted for possible retaliation over an earlier US tariff hike on steel and aluminium imports. That prompted fears the spat might depress trade worldwide and set back the global economic recovery.

Those fears eased on Monday after China’s government said it is open to negotiating with Washington. That announcement followed a news report indicating that US officials have submitted a list of market-opening requests.

“This declaration of tariffs on the president’s part was his typical opening salvo into a negotiation process,” said Randy Frederick, vice president of trading and derivatives at Charles Schwab.

“He’s done these things in the past, and now it looks like the markets are telling us, ‘Yep, that’s what’s happening’.”

Meanwhile, a top trade negotiator for South Korea said the nation has agreed to further open its auto market to the US as the two countries prepare to amend their six-year-old trade agreement.

Technology companies recouped some of the sector’s big losses last week. Microsoft rose 6.60 dollars, or 7.6%, to 93.78 dollars.

Financial stocks surged as bond yields rose. Higher yields are good for banks, because they drive up interest rates on mortgages and other loans, making them more profitable for lenders. Bank of America added 1.27 dollars, or 4.4%, to 30.44 dollars.

The yield on the 10-year Treasury rose to 2.85% from 2.81% late on Friday.

Lowe’s climbed 6.6% after the home-improvement retailer said chairman and CEO Robert Niblock is retiring. The stock gained 5.53 dollars to 89.30.

Facebook ended barely higher after erasing an early slide triggered by new questions about collecting phone numbers and text messages from Android devices.

The Federal Trade Commission confirmed on Monday that it was investigating the social media giant’s privacy practices, including whether the company engaged in “unfair acts” that cause “substantial injury” to consumers. The stock eked out a gain of 67 cents, or 0.4%, to 160.06 dollars.

Traders also had their eye on the latest corporate deal news.

Finish Line vaulted 3.28 dollars, or 31.1%, to 13.83 dollars after the sporting goods retailer agreed to be bought by JD Sports Fashion.

USG Corp jumped 6.52 dollars, or 19.5%, to 40.03 dollars after the building products company rejected an offer worth 42 dollars per share from Knauf.

Benchmark US crude fell 33 cents to settle at 65.55 dollars per barrel on the New York Mercantile Exchange. Brent crude, used to price international oils, shed 33 cents to close at 70.12 dollars in London.

In other energy futures trading, heating oil was little changed at 2.02 dollars a gallon, wholesale petrol lost 2 cents to 2.01 dollars a gallon, and natural gas added 3 cents to 2.62 dollars per 1,000 cubic feet.

Gold rose 5.10 dollars to 1,355 an ounce, silver gained 10 cents to 16.68 dollars an ounce, and copper slipped 2 cents to 2.97 dollars a pound.

The dollar rose to 105.22 yen from 104.82 yen on Friday. The euro strengthened to 1.2455 dollars from 1.2367.