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Stocks and ETFs Recover as Trump Eases Up on China

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The broader-market recovery

Today, the US stock market was on a path of recovery after starting the week on a bearish note yesterday. At 2:05 PM EDT, the S&P 500 Index, NASDAQ Composite Index, and Dow Jones Industrial Average were up 1.0%, 1.3%, and 0.7%, respectively, for the day. These broader-market gains came after the United States decided to temporarily ease its ban on Chinese tech giant Huawei. The Trump administration’s move is likely to reduce bitterness in US-China trade relations and open the possibility for renewed trade talks.

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Trump eases up on China

The US and Chinese markets’ sell-off started after President Trump threatened China on Twitter about increasing tariffs a couple of weeks ago. Since then, Trump kept on criticizing China in his tweets, which kept investors on their toes. His tweets about China resulted in heightened market volatility and triggered a sell-off in most cases.

Yesterday, President Trump, in an interview with Fox News Channel, said, “Twitter is really a typewriter for me.” He went on to describe his Twitter habit, saying, “Twitter goes on television, or if they have breaking news, I’ll tweet, I’ll say ‘Watch this—boom.’”

Thankfully for investors, today, Trump’s “typewriter” didn’t go after China, which helped markets recover.

US Stocks and ETFs rose

Among large US ETFs, the tech-heavy SPDR S&P 500 ETF (SPY) and Invesco QQQ Trust (QQQ) recovered sharply. While SPY rose 0.9%, QQQ was up 1.1% for the day.

Both the SPDR S&P 500 ETF and Invesco QQQ Trust invest in Microsoft, Apple, Amazon, and Facebook as their top four holdings. These stocks were up 2.4%, 0.7%, 0.2%, and 1.4%, respectively, helping SPY and QQQ recover in today’s session.

A sharper recovery in Chinese ETFs

Large Chinese ETFs the iShares China Large-Cap ETF (FXI), iShares MSCI China ETF (MCHI), and SPDR S&P China ETF (GXC) also saw a sharp recovery today in hopes of respite for the US-China trade war. FXI, MCHI, and GXC were up 1.0%, 1.5%, and 1.3%, respectively, today.

All these ETFs invest the largest portions of their portfolios in Chinese gaming giant Tencent Holdings (TCEHY). Tencent rose 1.5% today, helping these funds recover.

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