U.S. stock valuations get trickier as trade tensions rise

Trade tensions that have simmered in the background for investors are starting to boil over into a more severe problem for the U.S. stock market.

The latest developments involving a trade dispute pitting the United States against China and other countries are creating such uncertainty that investors are struggling to value stocks at a time strong corporate profits would otherwise bolster stocks as the bull market extends into its 10th year.

Although concerns over a global trade war have loomed over the stock market since March, the issue has barged into the foreground in recent days, as motorcycle maker Harley-Davidson Inc (HOG.N) and Mercedes-Benz maker Daimler (DAIGn.DE) warned of a financial toll from the trade tensions.

Investors, meanwhile, are reconsidering whether statements from U.S. President Donald Trump and his administration may be more than just an effort to gain leverage in any trade negotiations.

The dilemma of weighing trade concerns was cast into stark relief for investors on Monday when the S&P 500 dove 2 percent amid conflicting signals from the Trump administration over proposed restrictions on foreign investment in U.S. technology companies.

The benchmark index recovered somewhat to close down 1.4 percent, but still marked its biggest single-day decline in nearly three months. The S&P 500 rebounded modestly on Tuesday, ending up 0.2 percent.