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Stocks seesaw in volatile session after historic surge

CNBC logo CNBC 27/12/2018 Fred Imbert and Eustance Huang


Stocks seesawed Thursday, giving back some of the strong gains from the previous day amid renewed tensions between China and the United States.

The Dow was down 160 points after sinking more than 600 points earlier, led by losses in Apple and Microsoft. The S&P 500 pulled back 0.8 percent as the consumer discretionary sector lagged. The Nasdaq dropped 1.1 percent as shares of tech-related companies like Facebook, Amazon, Apple, Netflix and Google parent Alphabet all declined at least 2 percent.

Reuters reported, citing three sources familiar with the situation, that President Donald Trump is considering an executive order to ban U.S. companies from using equipment built by Chinese firms Huawei and ZTE. This executive order would come at a time when the two largest world economies are trying to strike a permanent trade deal. Earlier this month, China and the U.S. agreed to a 90-day grace period to come up with an agreement.

"The uncertainty will continue to weigh on the market," said Dave Campbell, principal at BOS. "I think that's going to help drive the volatility as we roll forward because I don't think it's going to be a clean path to an agreement or some kind of resolution."

"China has recognized they're a little more vulnerable in this trade negotiation with the U.S. because they have more at stake than the U.S. does, from a bilateral stance," Campbell said. "I think there will be a resolution, but it's going to be a rocky path, which to me means a lot more volatility both up and down."

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Shares of trade bellwethers like Caterpillar, Boeing and Deere all fell more than 0.8 percent.

This decline comes after a historic surge on Wall Street. On Wednesday, the Dow rallied to close more than 1,000 points higher, its biggest single-day point gain ever. The day's gain also marked the biggest upside move on a percentage basis for the Dow since March 23, 2009, when it rose 5.8 percentage points. The S&P 500 and Nasdaq also notch their best gains since March 23, 2009.

"Just when everyone had counted the market down, the market bounded back," John Carey, a portfolio manager at Amundi Pioneer, told CNBC on Thursday. He described the Wednesday bounce on Wall Street as "very positive" and also "quite surprising."

"I think it has to do with valuations, we got to a point where the market had sold off about 20 percent and price-to-earnings multiples had come down on the S&P from the low 20s to 15-16 times earnings and all of a sudden people looked around and thought stocks might be a good buy," Carey said.

Furthermore, he added, there were "catalysts" for the market movement, citing reassurances from the White House that the jobs of both Federal Reserve Chairman Jerome Powell and U.S. Treasury Secretary Steven Mnuchin were safe.

Still, Carey warned there remain "lots of uncertainties which could produce more volatility over the next days and weeks."

Related: 10 Reasons the Market Will Have a Good 2019 (Provided by InvestorPlace)

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