By Chris Matthews and Barbara Kollmeyer, MarketWatch

Chinese Vice Premier talks trade with Mnuchin, Lighthizer: report

U.S. stocks marched higher early Tuesday on renewed optimism over U.S.-China trade talks, a day after equities began the week with a strong rebound from sharp losses.

How are the benchmarks trading?

The Dow Jones Industrial Average shot up 332 points, or 1.4%, to 24,749, while the S&P 500 index gained 33 points, or 1.2%, to 2,669. The Nasdaq Composite Index jumped 89 points, or 1.3%, to 7,109.

What's driving the market?

The U.S. and China launched formal trade talks with a phone call including Treasury Secretary Steven Mnuchin, U.S. Trade Representative Robert Lighthizer and Chinese Vice Premier Liu He, where they discussed changes to fundamental Chinese economic policies (http://www.marketwatch.com/story/us-china-kick-off-new-round-of-trade-talks-with-focus-on-agriculture-economic-reform-2018-12-11).

President Donald Trump weighed in with a tweet, citing "Very productive conversations" with China and said to, "Watch for some important announcements!"

(https://twitter.com/realDonaldTrump/status/1072480983683870720)

Meanwhile, a report from Bloomberg (https://www.bloomberg.com/news/articles/2018-12-11/china-moves-on-u-s-car-tariff-cut-trump-tweeted-about) indicating that China is taking steps to reducing tariffs on cars imported from the U.S. sent shares of auto makers Ford Motor Company (F) and General Motors Co. (GM) higher.

Potentially detracting from surging trade optimism are reports of the arrest (https://www.reuters.com/article/us-china-icg/former-canadian-diplomat-detained-in-china-sources-idUSKBN1OA1EB?feedType=RSS&feedName=worldNews&utm_source=Twitter&utm_medium=Social&utm_campaign=Feed%3A+Reuters%2FworldNews+%28Reuters+World+News%29) of a former Canadian diplomat by Chinese authorities on Tuesday, which may fuel investor doubts over a broader U.S.-China detente. The arrest comes just days after police in Canada arrested the chief financial officer (http://www.marketwatch.com/story/huawei-cfo-arrested-in-canada-at-us-request-for-allegedly-breaking-iran-sanctions-2018-12-05) of China's Huawei Technologies Co. Ltd.

Tuesday gains would build on a Monday afternoon rally that was powered by the belief that the U.S. economy is resilient enough to continue growing at a healthy rate in 2019 and beyond, in part due to comments from influential banks such as J.P. Morgan and Goldman Sachs that fears about U.S. economic growth are overblown.

Read:Stock market on 'cliff's edge' as S&P 500 tests this crucial support level: chart watcher (http://www.marketwatch.com/story/stocks-threaten-cliffs-edge-as-sp-500-dips-below-2616-chart-watcher-2018-12-10)

What data are in focus?

The National Federation of Independent Businesses issued its small business optimism index for November, showing it fall 104.8 from a 107.1 reading in October, it's lowest reading since May (http://www.marketwatch.com/story/small-business-sentiment-slumps-to-7-month-low-in-november-2018-12-11).

The wholesale cost of goods and services rose by 0.1% in November (http://www.marketwatch.com/story/us-wholesale-prices-barely-rise-in-november-as-inflationary-pressures-recede-2018-12-11), above consensus estimates of a 0.1% decline, according to a MarketWatch poll of economists. Year-over-year rises in producer prices, however, fell to 2.5% from 2.9%, according to the Labor Department.

What are strategists saying?

The "fragile risk appetite" on display as stocks rallied into the close on Monday "got a boost overnight following reports that China's Vice Premier Liu He had phone talks over trade with U.S. Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer," Charalambos Pissouros, senior market analyst with JFD Brokers, wrote in a Tuesday note to clients.

"As for our view, reports of phone calls are far from suggesting that the dispute is near to be resolved, while Lighthizer's comments over the weekend (https://www.cbsnews.com/news/transcript-amb-robert-lighthizer-on-face-the-nation-december-9-2018/) keep the door for further escalation open," he wrote, referring to the trade rep's insistence that the American-imposed 90-day moratorium on new tariffs is a hard deadline.

"We specifically point out yesterday that the amount of bearish market calls have increased to levels that suggest a rally is near. Indeed, yesterdays technical recovery from the markets lows points to another positive session in the makings," said Peter Cardillo, chief market economists at Spartan Capital Securities, in a note to clients.

What stocks are in focus?

Ford stock was up 2.6% at the start of trade, while GM rose 2.9%.

Semiconductor stocks are also trading higher early Tuesday, after news of the launch of formal U.S.-China trade talks. Qorvo Inc. (QRVO) stock is up 2.5%, Seagate Technology Inc(STX) shares are rising 2.4%, and Advanced Micro Devices(AMD) shares advanced 2.8%.

Shares of Francesca's Holdings Corp. (FRAN) are in focus Tuesday, after the firm announced a quarterly loss and a decline in store foot traffic. The stock is trading down 11.1% early Tuesday.

Pfizer Inc. shares are falling 1% Tuesday, after the stock was downgraded to neutral from overweight by JPMorgan.

How did markets trade yesterday?

On Monday, the Dow Jones Industrial Average rose 34.31 points, or 0.1%, to end at 24,423.26, while the S&P 500 gained 0.2% to 2,637.72 and the Nasdaq Composite Index advanced 51.27 points, or 0.7%, to close at 7,020.52.

Gains came after losses that earlier had left the Dow down more than 500 points, the S&P off 50 points and the Nasdaq down 81 points. The S&P 500 closed 1.9% above its intraday low, its biggest such bounce since Feb. 6; the Dow closed 2.1% above its session low for its biggest intraday, upside reversal since April 4, according to Dow Jones Market Data.

How are other markets trading?

Asian stocks closed broadly higher Tuesday (http://www.marketwatch.com/story/china-stocks-make-tentative-gains-as-japans-nikkei-falters-in-asia-2018-12-10), with Chinese benchmarks leading the way. The Shanghai Composite Index rose 0.4% the Shenzhen Composite ose 0.9%, while Japan's Nikkei ended the day lower.

European markets were advancing Tuesday, with the Stoxx Europe 600 up roughly 2.1% on the day.

Crude oil was also advancing, up 1.4%, while gold edged 0.2% higher and the U.S. dollar slipped by 0.2%.

(END) Dow Jones Newswires

December 11, 2018 09:59 ET (14:59 GMT)