By Sue Chang, MarketWatch , Ryan Vlastelica

Tesla shares drop on report of Justice Department probe

U.S. stocks vaulted higher Tuesday afternoon, with investors shrugging off escalating trade tensions to instead focus on an economy that remains strong by many measures. The gains were led by consumer-discretionary and technology shares, two sectors that had slumped in the previous session.

Where are the major benchmarks trading?

The Dow Jones Industrial Average rallied 246 points, or 1%, to 26,308, roughly 1.2% away from its record high. The S&P 500 index advanced 21 points, or 0.8%, to 2,910 and the Nasdaq Composite Index climbed 80 points, or 1%, to 7,975.

Stocks had declined Monday, marking the biggest one-day drop for the S&P since mid-August and the worst session for the Nasdaq since late July.

What's driving the market?

President Donald Trump late Monday said he would impose new tariffs (http://www.marketwatch.com/story/trump-to-impose-another-200-billion-in-tariffs-on-chinese-goods-2018-09-17) on about $200 billion in Chinese goods. He also threatened additional penalties as part of his campaign to pressure Beijing to change its commercial practices.

See:China-U.S. trade war will last for 'maybe 20 years,' says China's best-known CEO (http://www.marketwatch.com/story/china-us-trade-war-will-last-for-maybe-20-years-says-chinas-best-known-ceo-2018-09-18)

In response, China retaliated with tariffs of 5% to 10% (https://www.wsj.com/articles/chinese-officials-scramble-to-respond-to-trumps-new-tariffs-1537275015?) on $60 billion worth of U.S. products that will take effect Sept. 24 and said it may introduce more measures if the U.S. goes ahead with higher tariffs, according to The Wall Street Journal.

Read:Trade war's 'nuclear option' could be bad for Apple, Amazon: strategist (http://www.marketwatch.com/story/trade-wars-nuclear-option-could-be-bad-for-apple-amazon-strategist-2018-09-18)

Trade has been a headline risk for months, and while it has increased day-to-day volatility, the broad indexes have largely ground higher, supported by strong growth in corporate earnings and improving economic data.

What are analysts saying?

"In my opinion, I see President Trump as trying to force the trading partners to the bargaining table to renegotiate trade deals that have long favored other countries over the U.S. His methods are unconventional but the U.S. economy is strong, earnings are healthy and confidence among consumers and investors remains high," wrote Robert Pavlik, chief investment strategist at SlateStone Wealth, in a note to clients.

"Trump promised to take on trade during his run for presidency and with the recent announcement that the U.S. intends to raise the amount of products coming under tariff inclusion will ensure that this is an issue that will not go away quietly but we remain hopeful that eventually these tactics remain in check and will conclude amicably and without a lasting negative impact to global growth," he said.

Louis Kuijs, head of Asia economics at Oxford Economics, said that the trade war may be prolonged as the U.S. government seems confident about winning and as a result, be reluctant to consider concessions to de-escalate the conflict.

What stocks are in focus?

Tesla Inc.(TSLA) shares slid 3.8% after Bloomberg reported that the electric car company is under investigation by the Justice Department (http://www.marketwatch.com/story/tesla-stock-tanks-after-report-company-faces-criminal-probe-over-musks-tweet-2018-09-18-121035917) over tweets from Chief Executive Elon Musk last month about taking the company private.

Shares of Oracle Corp. (ORCL) rose 0.2% a day after the software company reported quarterly revenue that missed expectations (http://www.marketwatch.com/story/oracle-earnings-show-another-cloud-miss-stock-falls-2018-09-17), hurt by weaker-than-expected cloud-services sales.

Visa Inc.(V) and Mastercard Inc.(MA)agreed to settle a class-action lawsuit (http://www.marketwatch.com/story/visa-mastercard-settle-us-retailers-class-action-suit-2018-09-18) brought by U.S. retailers in 2005. Shares of Visa rose 1.2% while Mastercard rose 1.9%.

General Mills Inc.(GIS) slumped 6.8% after it reported revenue below forecasts even though adjusted first-quarter earnings beat expectations (http://www.marketwatch.com/story/general-mills-tops-profit-estimate-as-sales-fall-slightly-short-2018-09-18).

AutoZone Inc. (AZO) fell 2.2% after it reported adjusted fourth-quarter earnings that beat expectations while revenue came in below forecasts. Same-store sales also grew less than had been expected (http://www.marketwatch.com/story/autozones-stock-sinks-after-profit-beats-but-sales-miss-2018-09-18).

Red Hat Inc.(RHT) shares fell 0.7% after it was downgraded to neutral by JPMorgan analysts.

Viking Therapeutics Inc. (VKTX) surged 95% after it reported positive results (http://www.marketwatch.com/story/viking-therapeutics-announces-positive-results-in-trial-of-non-alcoholic-fatty-liver-treatment-2018-09-18) in a midstage trial of a treatment for nonalcoholic fatty liver disease.

What are other markets doing?

Asian stocks rallied as investors shrugged off the latest news on tariffs (http://www.marketwatch.com/story/asian-markets-mostly-shrug-off-latest-us-tariffs-targeting-china-2018-09-17). However, the region has struggled lately, and recently traded at four-year lows. Major European indexes were mostly higher (http://www.marketwatch.com/story/europe-stocks-limp-along-dented-by-trade-war-headlines-2018-09-18).

Crude-oil prices saw strong gains (http://www.marketwatch.com/story/oil-rallies-as-saudi-arabia-said-to-grow-comfortable-with-crude-above-80-a-barrel-2018-09-18) and gold settled lower (http://www.marketwatch.com/story/gold-churns-above-1200-as-dollar-stocks-react-cautiously-to-deepening-trade-fight-2018-09-18). The U.S. dollar index was moderately higher (http://www.marketwatch.com/story/dollar-finds-footing-as-us-china-trade-fight-intensifies-2018-09-18).

(END) Dow Jones Newswires

September 18, 2018 14:50 ET (18:50 GMT)