US open: Trading bounces between small gains and losses as Korean tensions die down

US stocks kept swiching between gains and losses in early trading on Tuesday as news from discussions between North and South Korea, reported to include plans for the first major summit between the two in over a decade, pointed to a de-escalation of tensions and the easing of one of the market's biggest geopolitical uncertainties.

At 1530 GMT, the Dow Jones Industrial Average and the S&P were up 0.06% and 0.18%, respectively, while the Nasdaq had shot up 1.55%. Stocks ended comfortably in the black on Monday after Paul Ryan and other Republicans voiced their concerns over a possible trade war, urging the White House not to go ahead with the President's plans to impose tariffs on imported steel and aluminium later in the week.

Craig Erlam, senior market analyst at Oanda, said: "Investors may have been rattled by the prospect of a trade war after Donald Trump’s recent tariffs announcement, but equity markets are once again recovering as it becomes clear that the US President does not have the full backing of his party of this one.

"Some Republicans, including House Speaker Paul Ryan, have warned against starting a trade war that could damage the economy and undo the benefits of the recently passed tax reforms, highlighting that Trump is lacking the full support of his party on this particular issue. Trump’s comments linking the tariffs to NAFTA negotiations also suggested that they could be dropped if a new agreement is signed, suggesting he may simply be using the threat of tariffs to put pressure on others to deliver what he considers to be fair and reciprocal trade.

"That may enable Trump to extract some concessions from Mexico and Canada, or at least allow him to claim credit for securing a better deal, but it’s unlikely to work as well with the European Union and China, among others. The prospect of a trade war will be a big concern for markets, with many of the view that such action would drive up prices for all and weigh on economic growth."

The positive tone was also underpinned by reports that the leaders of North and South Korea are planning to hold a summit between the two countries next month. Reports indicating that North Korean leader, Kim Jong Un, is willing to begin negotiations with the US about abandoning its nuclear weapons also lifted the mood in markets.

In terms of economic data, new orders for manufactured goods saw their largest drop in six months in January as business spending on equipment appeared to be reducing after strong growth in 2017, according to the Commerce Department's factory orders report.

Factory goods orders fell 1.4% in the month following five straight monthly increases. January's drop was broadly in line with economists' expectations.

Orders picked up 8.4% on a year-on-year basis.

The dollar pared its losses against a basket of currencies following comments made by Dallas Federal Reserve President Robert Kaplan ahead of a moderated discussion at an annual energy conference in Houston on Tuesday, where he said that current US trade negotiations had not impacted his economic forecast.

Later in the day, nvestors were expected to turn their attention to speeches from New York Fed President William Dudley and Fed Governor Lael Brainard.

On the corporate front, shares of Ciena Corp gained 9.08% after its quarterly earnings beat expectations, but discount retailer Target lost as much as 3.71% after its fourth-quarter profit missed analysts' forecasts.

Earnings were still due from discount retailer Dollar Tree, Brown-Forman Corp and Costco.