By Riva Gold and Amrith Ramkumar 
   -- Stocks stabilize following Tuesday drop 
 
   -- Treasury yields rise 
 
   -- Walgreens, 21st Century Fox among best performers 

U.S. stocks stabilized Wednesday after escalating worries about U.S.-China trade relations triggered a selloff in the previous session.

Investors this week have been more seriously considering the chance that the world's two largest economies could embark on a growth-hindering trade war, although many still expect the two countries to ultimately dial down their plans.

Stocks, commodities and bond yields fell Tuesday after President Donald Trump called for his administration to identify $200 billion in Chinese goods for a fresh round of tariffs.

"Our base case is this gets walked back [...] but it's getting more serious now," said Tim Courtney, chief investment officer at Exencial Wealth Advisors. "The longer it goes on and the further we go down this path, the greater the chances are that this could actually stick."

The Dow Jones Industrial Average was recently up 7 points, or less than 0.1%, to 24707 after entering the day on a six-session losing streak -- its longest since March 2017. The S&P 500 was up 0.4%, and the tech-heavy Nasdaq Composite rose 1%.

Some investors aren't sure that trade tensions will escalate, and major indexes have tended to stabilize following initial drops as the trade fights have escalated.

Analysts were weighing news that the U.S. ambassador to Germany, Richard Grenell, is expected to propose abandoning all import tariffs for cars between the European Union and the U.S. on behalf of Germany's leading auto makers.

Despite recent trade fears and anxiety about higher interest rates, some investors think steady earnings growth will boost stocks moving forward.

"I'm not too worried," said Chris Bertelsen, chief investment officer of Aviance Capital Management. "If it turns out to be the great trade wars of the 1930s, I will be wrong, but that's a position we're willing to take."

The yield on the benchmark 10-year U.S. Treasury yield edged up to 2.924%, according to Tradeweb, from 2.893%. Yields rise as prices fall. Federal Reserve Chairman Jerome Powell said at the European Central Bank's annual policy conference Wednesday that sturdy U.S. economic growth has built a strong case for continuing to gradually lift interest rates.

Walgreens Boots Alliance was among the S&P 500's best performers, adding 4.7% following news that it would be added to the Dow Jones Industrial Average, replacing General Electric.

Shares of 21st Century Fox rose 7.9% after Fox and Walt Disney announced a new merger agreement, increasing the value of the deal and adding a cash component.

PayPal shares also climbed after the company agreed to acquire financial-technology company Hyperwallet Systems Inc. for about $400 million.

Among decliners, shares of Starbucks fell 9.2% after it said it would close 150 U.S. stores in its 2019 fiscal year, while Oracle dropped 6.4% after it warned currency conversions would weaken the company's quarterly performance.

Elsewhere, the Stoxx Europe 600 added 0.3% to snap a three-session losing streak, with bank shares among the best performers.

Earlier, Japan's Nikkei Stock Average rose 1.2% and Hong Kong's Hang Seng advanced 0.8%, after both indexes tumbled on Tuesday.

Write to Riva Gold at riva.gold@wsj.com and Amrith Ramkumar at amrith.ramkumar@wsj.com

(END) Dow Jones Newswires

June 20, 2018 14:41 ET (18:41 GMT)

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