S&P 500 and Dow turn higher, Nasdaq dips with Fed's Powell, China tariff tensions in focus

US stocks diverged on Tuesday after China upped the ante in its trade spat with the US, while investors digested the kickoff of third quarter earnings season from Wall Street's banking giants.

The Dow Jones Industrial Average rose 0.5% after paring steep losses earlier in the session. The S&P 500 also flipped into the green, rising 0.1%, while the tech-heavy Nasdaq Composite slipped 0.2%.

The unsettled mood shifted throughout the morning, as stocks poked into the green amid Fed Chair Jerome Powell’s speech on Tuesday at the NABE annual meeting. In his remarks, the Fed chair said that the central bank's outlook for employment and inflation had not changed, implying that further Fed cuts are possible.

Powell's remarks came into heavy focus with key data reports stalled by the government shutdown, leaving the Fed and investors flying blind on the state of the jobs market and inflation.

Stocks had opened the session downtrodden after a strong rebound on Monday, thanks to a fresh round of retaliation from Beijing to President Trump's trade salvos. Its latest moves to target US shipping have undermined recently revived hopes that the US and China will avoid an all-out trade war.

China has placed sanctions on five US-linked units of South Korean shipbuilding firm Hanwha Ocean, effectively barring Chinese companies from doing business with them. Both countries also began charging special port fees on one another's vessels on Tuesday in a bid for maritime dominance.