Stocks rebound after US eases off China sales restrictions

NEW YORK (AP) — U.S. stocks rallied in morning trading on Wall Street Tuesday after the U.S. government temporarily eased off its proposed restrictions on technology sales to Chinese companies.

Technology stocks climbed out of the ditch created Monday by the planned restrictions, aimed primarily at Chinese telecom gear maker Huawei. About one-third of that company’s suppliers are American chipmakers and the move would crimp sales for companies including Qualcomm and Broadcom. Both companies posted early gains, along with other chipmakers.

The U.S. government’s decision to issue a 90-day grace period on technology sales to Huawei, ZTE and other Chinese companies also relieves some worry on Wall Street about yet another escalation in the trade war between the U.S. and China. The heightened tensions over trade have put the market in a slump for the last two weeks — the S&P 500 is down about 3% for May, although the index still shows a gain of 14 percent for the year.

Banks and industrial stocks also helped push the market broadly higher Tuesday. Citigroup and Bank of America rose less than 1 percent. United Technologies rose 1.4 percent.

Apple rose 1.5 percent, helping to push the Dow Jones Industrial Average higher after dragging it down Monday. Boeing gained 1.3 percent, also helping to boost the Dow.

Utilities and consumer staples lagged the market as investors shifted away from those safe-play holdings and took on riskier stocks. Gains in consumer-oriented stocks were being held back by disappointing financial results from department stores J.C. Penney and Kohl’s.

The latest corporate results nearly cap off an earnings season that has been mixed, but better than Wall Street initially feared.

KEEPING SCORE:

The S&P 500 index rose 0.6% as of 10 a.m. The Dow Jones Industrial Average rose 124 points, or 0.5 percent, to 25,802. The technology heavy Nasdaq composite rose 0.8 percent.

RETAIL RUT:

J.C. Penney fell 7% and Kohl’s plunged 12.8 percent after reporting disappointing first quarter financial results.

Struggling department store operator J.C. Penney reported declining sales and a surprisingly wide loss. The retailer attributed part of the weak quarter to its no longer selling major appliances and furniture.

Kohl’s also fell short of forecasts as it deals with slumping sales. The company also cut its profit forecast for the year.

Department stores have been dealing with increased competition from off-price stores and the constant growth of online shopping.

RECOVERY MODE:

Chipmakers reversed course and gained ground on reports the U.S. is easing off sales restrictions to China.

Intel rose 1.7 percent. Broadcom and Qualcomm, which both get at least half their revenue from China, rose 1%. Texas Instruments rose 2 percent.