By Caroline Valetkevitch
NEW YORK (Reuters) -U.S. stocks were little changed in choppy trading on Wednesday as the escalating trade war between the U.S. and its partners fanned investor uncertainty, while the euro hit its highest in four months against the U.S. dollar.
Oil prices fell sharply, on track for a third day of losses, weighed by trade tensions after U.S. crude oil stocks posted a larger-than-expected build.
U.S. Commerce Department chief Howard Lutnick said in an interview with Bloomberg that President Donald Trump is considering protecting sectors like automakers from the impact of U.S. tariffs and his administration will make an announcement later on Wednesday about tariffs imposed on Canada and Mexico.
U.S. tariffs on imports from Canada, Mexico and China went into effect on Tuesday, when Trump also delivered his State of the Union address, in which he touted his successes since taking office six weeks ago.
Canada and China retaliated immediately, while Mexican President Claudia Sheinbaum said her country may look for other trade partners.
Stocks are volatile because of the uncertainty over what is next with tariffs, said Rick Meckler, partner at Cherry Lane Investments in New Vernon, New Jersey.
“A trade war that keeps escalating is highly negative,” he said.
Investors also digested an ISM survey, which showed the U.S. services sector activity stood in the expansion territory at 53.5, higher than expectations of 52.6.
The Dow Jones Industrial Average rose 123.66 points, or 0.29%, to 42,648.78, the S&P 500 rose 3.20 points, or 0.06%, to 5,781.35 and the Nasdaq Composite rose 25.61 points, or 0.14%, to 18,310.77.
MSCI’s gauge of stocks across the globe rose 6.52 points, or 0.77%, to 852.66. The pan-European STOXX 600 index rose 0.91%. The prospect of a meaningful increase in European spending on security has sent the region’s defense stocks soaring this month.
The euro was up 1.32% at $1.0764, on track for its best weekly gain since November 2022. It got a boost late Tuesday, when German political parties agreed to a 500 billion-euro ($534.75 billion) infrastructure fund and, crucially, an overhaul in borrowing limits that economists billed as “a really big bazooka”.
The overhaul to German government borrowing also triggered the biggest sell-off in the country’s debt since the late 1990s.
U.S. Treasury yields were mostly higher as investors assessed the economic data while weighing the uncertainty surrounding Trump’s tariffs.
The U.S. 10-year note yield rose 2.5 basis points to 4.235%, from 4.21% late on Tuesday.
Investors also scrutinized the start of China’s annual sessions of its parliament, the National People’s Congress, at which Beijing retained a goal of roughly 5% economic growth for 2025.
The dollar weakened 0.20% to 7.237 versus the offshore Chinese yuan.
U.S. crude fell 4.39% to $65.27 a barrel and Brent fell to $68.37 per barrel, down 3.76% on the day.
(Additional reporting by Amanda Cooper in London and Kevin Buckland in Tokyo; Editing by Jacqueline Wong, Clarence Fernandez, Jan Harvey, Christina Fincher and Richard Chang)
