By David Hodari

U.S. stocks rose as investors viewed a fresh round of tariffs on Chinese goods, as well as China's early response, as more measured than expected.

Because the introduction of the latest tariffs will be staggered, there is cautious optimism there is time for negotiations between the countries, some traders said.

The Dow Jones Industrial Average gained 184.84 points, or 0.7%, to 26246.96 and the S&P 500 rose 15.51 points, or 0.5%, to 2904.31, while the Nasdaq Composite gained 60.32, or 0.8%, to 7956.11.

Investors sold stocks around the world Monday in anticipation of the Trump administration's announcement and sent the Shanghai Composite to its lowest level since November 2014.

"Whenever there are tariff threat rumors, the market's knee-jerk reaction is to sell off," said Mohit Bajaj, director of ETF trading solutions at WallachBeth Capital. "But then when we realized it's smaller, we bounce back."

President Trump late Monday announced new tariffs on $200 billion in Chinese goods. The White House said the 10% tax is set to be next Monday on a range of Chinese imports, including luggage and seafood. That levy will rise to 25% at the end of 2018. In response, China's commerce ministry said it "has no choice but to undertake synchronous retaliation" to defend its interests and unveiled plans for tariffs on an additional $60 billion of U.S. goods.

The fresh round of tariffs marked an escalation of the continuing trade spat that has dogged relations between the world's two largest economies. But investors "were expecting tariffs of 25% and instead only got ones of 10% for now, so the reaction is quite positive," said Claudia Panseri, European equity strategist at UBS Global Wealth Management.

The technology sector was one corner of the market where the tariffs were embraced as less drastic than feared. The sector rebounded Tuesday, rising 0.6% in the S&P 500 after dropping 1.4% a day earlier. Importers have in recent weeks sought to be spared from tariffs, with the Trump administration removing about 300 products initially included in the original tariff list released in early July. Smartwatches -- after a direct request from Apple -- and Bluetooth devices were among the products to be exempted from the levies.

Also helping the bounce from Monday's declines were market expectations that negotiations between Washington and Beijing, currently being planned for the coming weeks, will proceed as expected.

Some traders were interpreting the staggered introduction of the tariffs as a sign the Trump administration is still eager to reach a trade deal with China ahead of midterm elections in November, according to Stewart Cook, head of London sales trading at Berenberg.

The Stoxx Europe 600 rose 0.1% after China-exposed indexes shrugged off early pressure in Asia-Pacific trading. The Shanghai Composite Index added 1.8%, while Hong Kong's Hang Seng closed 0.6% higher.

The impact of the new tariffs on foreign-exchange trading was limited, with the Chinese yuan 0.1% lower against the dollar. The WSJ Dollar Index, which measures the U.S. currency against a basket of 16 others, rose 0.1%.

China's currency has fallen more than 5% against the dollar this year, with analysts pointing to trade tensions as a major factor behind increasingly torpid economic figures out of Beijing.

Meanwhile, the dollar's steady rise has stalled in recent weeks, with strategists suggesting that investors are becoming inured to the trade fight.

The dollar "won't price the same thing over and over again. Part of the recent slowing is that the Chinese were letting the yuan weaken, but since they effectively called a halt to weakening in the currency, we've seen things calm down," said Kit Juckes, chief foreign-exchange strategist at Société Générale.

-- Corrie Driebusch

contributed to this article

Write to David Hodari at David.Hodari@dowjones.com

(END) Dow Jones Newswires

September 18, 2018 18:20 ET (22:20 GMT)

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