By Sunny Oh

The Wall Street Journal reports U.S. officials were debating rolling back tariffs on Chinese imports

Treasury yields rose Thursday as stocks mounted a late-session rally after reports that the U.S. was debating ending tariffs on Chinese imports helped ease fears around a potential trade war.

The 10-year Treasury yield rose 1.8 basis points to 2.747%, after briefly touching an intraday low of 2.699%. The 2-year note yield picked up 1.9 basis points to 2.564%, from a session low of 2.520%, while the 30-year bond yield was mostly unchanged at 3.075%, around its highest levels since Dec. 18. Bond prices move in the opposite direction of yields.

Stocks received a lift from a report by The Wall Street Journal (https://www.wsj.com/articles/u-s-weighs-lifting-china-tariffs-to-hasten-trade-deal-calm-markets-11547754006) saying U.S. officials were considering rolling back import levies on Chinese goods to calm markets and ease trade tensions. The U.S. Treasury Department said that no recommendations on tariffs had been made. Both Beijing and Washington are looking to resolve current negotiations before a March deadline, when tariffs on $200 billion of Chinese imports are slated to rise to 25% from 10% (https://www.reuters.com/article/us-usa-trade-china-tariffs/u-s-sets-new-march-2-date-for-china-tariff-increases-amid-talks-idUSKBN1OD2QL).

Bond yields rose as they took their cue from U.S. equities, with the S&P 500 and the Dow Jones Industrial Average posting solid gains (http://www.marketwatch.com/story/stocks-poised-to-open-lower-snap-2-session-rise-2019-01-17).

China's chief trade negotiator Liu He will go to Washington in a few weeks for talks starting Jan. 30.

"There will be progress when a high-level Chinese delegation visits Washington at the end of this month, but getting a deal before an early March deadline is an uphill battle. An extension is likely, which probably would delay the threatened U.S. 25% tariffs on a wide range of Chinese products," said Greg Valliere, chief global strategist at Horizon Investments, in a note.

Yet earlier in the day, investors were worried about intensifying trade tensions after the Justice Department had reportedly put Huawei under investigation for allegedly stealing trade secrets from T-Mobile (http://www.marketwatch.com/story/feds-launch-criminal-probe-into-huawei-over-alleged-trade-theft-2019-01-16). The case comes in the wake of the arrest of the telecoms firm's chief financial officer Meng Wanzhou in Canada in early December at the request of the U.S. for alleged bank fraud.

Yields initially rose after the January reading for the Philadelphia Fed's manufacturing survey jumped to 17.0 from 9.1 in December (http://www.marketwatch.com/story/philadelphia-fed-manufacturing-index-rebounds-in-january-2019-01-17). The data helped to counter fears around tariff-related weakness in U.S. factories, especially after sharp drops in other widely followed manufacturing gauges.

"This report should lessen fears that growth is suddenly weakening sharply," wrote Jim O' Sullivan, chief U.S. economist for High Frequency Economics.

Political jitters from Washington showed few signs of disappearing as the government shutdown resulted in federal workers missing paychecks and a growing backlog of economic data that has yet to be released. Analysts warn the data is likely to be distorted once it comes out.

See: Why stock-market investors may soon need to worry about the government shutdown (http://www.marketwatch.com/story/why-stock-market-investors-are-starting-to-worry-about-the-government-shutdown-2019-01-16)

Though, the coming data has been thinned out, investors had some information on the economy's health to digest on Thursday. First-time claims for unemployment benefits declined by 3,000 to 213,000 (http://www.marketwatch.com/story/jobless-claims-fall-but-more-federal-workers-seek-aid-as-government-shutdown-drags-on-2019-01-17) in the week ended Jan. 12, below the 220,000 consensus forecast produced by a MarketWatch survey of economists.

(END) Dow Jones Newswires

January 17, 2019 15:59 ET (20:59 GMT)