Trader Tommy Kalikas works on the floor of the New York Stock Exchange, Wednesday, April 4, 2018. Stocks are opening sharply lower on Wall Street as an escalating trade dispute between the U.S. and China poses a threat to global economic growth and corporate profits. (AP Photo/Richard Drew)

NEW YORK - After an early jolt, stocks rallied and finished higher Wednesday as investors bet that back-and-forth tariff threats between the U.S. and China won't blossom into a bigger dispute that damages global commerce.

The Dow Jones industrial average plunged 501 points after the opening bell but made it all back, and more. Household goods makers, retailers and homebuilders led the way while technology companies reversed some early losses. But two major targets of China's possible tariffs, aerospace company Boeing and farm equipment maker Deere, finished lower.

The early declines followed an announcement by the Chinese government that it plans to impose tariffs of 25 per cent on a list of U.S. goods worth $50 billion, including soybeans and aircraft. The U.S. plans to place tariffs on a similar amount of Chinese goods, including industrial robots and telecom gear, subject to potential tariffs to protest Beijing's alleged theft of U.S. technology.

But investors relaxed as both sides emphasized a willingness to talk. President Donald Trump's top economic adviser, Larry Kudlow, suggested the U.S. tariffs won't be implemented if China lowers barriers to trade. Others noted the two countries have too much to lose from a trade war.

"The most likely outcome is smoke, but no fire," said Bill Adams, senior international economist at PNC Financial. "The amount that both countries have invested in bilateral trade co-operation and economic co-operation is so significant that the costs of going back would be very painful, and more than either country would want to bear."

U.S. trade policy has loomed over the markets since early March. Over the last five weeks stocks have plunged numerous times as investors reacted to tariff developments with shock and concern that an increase in protectionism will hurt international trade and company profits. But often, investors have caught their breath and decided that a full-blown trade war is unlikely, resulting in sharp recoveries.

On Wednesday, both of those things appeared to happen in the same day.

The Dow Jones industrial average advanced 230.94 points, or 1 per cent, to 24,264.30, after a swing of more than 700 points. The S&P 500 index climbed 30.24 points, or 1.2 per cent, to 2,644.69. The Nasdaq composite rose 100.83 points, or 1.5 per cent, to 7,042.11. The Russell 2000 index of smaller-company stocks gained 19.51 points, or 1.3 per cent, to 1,531.66.

Boeing, which delivered one-fourth of all its planes to China last year, fell as much as 5.7 per cent early on and finished with a loss of $3.38, or 1 per cent, at $327.44.

Adams, of PNC Financial, said the tariffs would be especially painful for companies in agriculture: machinery makers in the U.S. would pay more for imported components, and they wouldn't sell as much food in China because their products would be more expensive. He said that will stir up political pressure against the trade sanctions.

Farm equipment maker Deere lost $4.47, or 2.9 per cent, to $148.57, after an early drop of 6.2 per cent. Futures for Soybeans, a big U.S. export to China, fell 2.2 per cent on the CBOT.

However Adams said that there was good news for food producers, as the Chinese government proposed duties on imported beef, but not pork or chicken. Hormel jumped $1.65, or 4.8 per cent, to $35.87.

European stocks fell. Germany's DAX lost 0.4 per cent while the CAC 40 in France dipped 0.2 per cent. The FTSE 100 in Britain gained 0.1 per cent.

Most Asian indexes closed before China announced its tariff plan, but Hong Kong's Hang Seng was still trading and slumped 2.2 per cent.

The biggest worry for investors is that an escalating trade war will derail a global economy that is largely growing in unison. The global economy is expected to grow 3.9 per cent this year, which would be its strongest showing in seven years, according to the International Monetary Fund.

Elsewhere, homebuilders rose following strong quarterly report from Lennar, which gained $5.73, or 10 per cent, to $62.82.

Tech stocks have added to the recent volatility, mostly due to controversies surrounding technology companies like Facebook. On Wednesday, Facebook closed with a small decline, but other big tech names such as Apple and Microsoft closed higher.

After a big early loss, U.S. crude dipped 14 cents to $63.37 a barrel in New York while Brent crude, used to price international oils, fell 10 cents to $68.02 a barrel in London.

Wholesale gasoline stayed at $1.98 a gallon. Heating oil lost 2 cents to $1.98 a gallon. Natural gas rose 2 cents to $2.72 per 1,000 cubic feet.

Bond prices turned lower. The yield on the 10-year Treasury note rose to 2.80 per cent from 2.77 per cent. Gold prices jumped as much as 0.9 per cent early on, but finished up just $2.90, or 0.2 per cent, at $1,340.20 an ounce. Silver fell 14 cents to $16.25 an ounce and Copper lost 5 cents to $3.01 a pound.

After an early loss, the dollar rose to 106.74 yen from 106.61 yen. The euro rose to $1.2280 from $1.2267.

____

AP Business Writers Stan Choe contributed from New York and Kelvin Chan contributed from Hong Kong.

____

AP Markets Writer Marley Jay can be reached at http://twitter.com/MarleyJayAP . His work can be found at https://apnews.com/search/marley%20jay

News from © The Associated Press, 2018