S&P 500 rises in choppy session; shutdown threat, trade in focus

By Sinead Carew

New York (Reuters) - Wall Street's three major indexes turned higher in a volatile session as investors appeared hopeful about China-U.S. trade talks, reversing an earlier slump that coincided with President Donald Trump's threat to shut down the U.S. government.

A U.S. official told Reuters late in the trading session that China has indicated it will cut tariffs on U.S. autos to 15 percent from 40 percent but that the Trump administration was awaiting formal documentation and timing.

Wall Street had a strong start to the session on news that U.S. and Chinese officials had discussed a road map for the next stage of trade talks, which Trump called "very productive."

But later in the morning the mood soured as Trump publicly fought with Senate Democratic Leader Chuck Schumer and House Democratic Leader Nancy Pelosi and threatened a government shutdown at a meeting about funding for a border wall, dampening hopes for a deal ahead of a December deadline.

"The key drivers of today's volatility are the political and geopolitical headlines," said Carol Schleif, Deputy Chief Investment Officer, Abbot Downing in Minneapolis, citing the U.S. government shutdown fears, U.S.-China talks and uncertainty about Britain's exit from the European Union.

But Schleif said investors might do well to take advantage of the volatility to pick up bargains against a backdrop of continued growth in earnings and the U.S. economy.

"We can't control the headlines but the thing we can lean on is that the underlying fundamentals remain solid," she said.

At 3:25 PM ET, the Dow Jones Industrial Average rose 111.67 points, or 0.46 percent, to 24,539.75, the S&P 500 gained 16.48 points, or 0.67 percent, to 2,655.22 and the Nasdaq Composite added 47.99 points, or 0.74 percent, to 7,072.51.

By late afternoon only one of the S&P's 11 major sectors was in the red with the S&P financial sector's <.SPSY> 0.13 percent drop.

Consumer staples <.SPLRCS> were the strongest gainers, rising 1.32 percent.

On Monday, the S&P had bounced off an eight-month low to end higher, with strategists saying trading algorithms kicked in with buy signals at the lows of the day.

"We're in a period of a lot of intra-day volatility where market participants are trying to figure out where things should be properly valued and you're going to get a lot of back and forth," said Scott Brown, chief economist at Raymond James in St. Petersburg, Florida.

Brown said the outlook for next year was being clouded by a "period of extraordinary uncertainty," leaving investors trying to balance stock valuations with headlines such as political news in Washington, Brexit, interest rates and trade.

Adding to nerves was a report that some lawmakers in British Prime Minister Theresa May's Conservative Party believed they had sufficient numbers to mount a no-confidence vote to her leadership.

The S&P drew its biggest boost from Microsoft , up 1.3 percent, while Apple Inc , off 0.5 percent, was its biggest drag.

Advancing issues outnumbered declining ones on the NYSE by a 1.14-to-1 ratio; on Nasdaq, a 1.07-to-1 ratio favored decliners.

The S&P 500 posted 15 new 52-week highs and 31 new lows; the Nasdaq Composite recorded 22 new highs and 231 new lows.

(Additional reporting by Medha Singh in Bengaluru; Editing by Sriraj Kalluvila and Chizu Nomiyama)