The Dow Jones Industrial Average finished the day 2.24 points higher at 25,967.33, while the S&P 500 was down 0.16% to 2,879.42 and the Nasdaq Composite fell 0.26% to 7,943.32. The Dow was down 75 points at its intraday low and was up as much as 153 points at one point. The volatile session followed big losses in the previous two days with the Dow falling nearly 540 points in those two sessions.
A disappointing forecast from Intel late in the trading day helped drag down the market. Intel fell 2.46%.
The 30-stock Dow jumped midday Wednesday after White House Press Secretary Sarah Sanders affirmed President Donald Trump's tweet earlier that China is coming to Washington this week to strike a deal.
"I would still say this is very precarious, and you are still getting the U.S. spin on things," said Marc Chandler, chief market strategist at Bannockburn Global Forex. "I think tomorrow is a wildcard."Investors are still worried that U.S. and China would be unable to resolve a dispute over a proposed trade agreement before new tariffs threatened by Trump are implemented Friday.
China said on Wednesday will take "necessary" countermeasures if U.S. raises tariffs Friday as Trump threatened on Sunday. The Chinese Commerce Ministry announcedthat Beijing will retaliate if U.S. tariffs on $200 billion of Chinese goods is hiked to 25% from 10%.
"It's another cliffhanger," said Larry Adam, chief investment officer at Raymond James, referring to Trump's tariff threat. "There are so many levers that can be pulled here. I still think ultimately we do end up getting a deal because it's too important for both economies."
Trump said in a Twitter post Sunday the U.S. would hike tariffs on Chinese goods as soon as Friday, which caught investors off guard and sparked a global sell-off. The Dow on Tuesday posted its biggest decline since January 3, as traders realized Trump's threat was not just a negotiation tactic after U.S. Trade Representative Robert Lighthizer confirmed the higher levies are coming this week.
The Dow lost nearly 540 points during Monday and Tuesday amid the trade dispute, while the S&P 500 and Nasdaq were down more than 2% after both hit all-time highs last week. Chinese trade officials backtracked on key aspects of a trade deal draft, undercutting hopes that the Chinese delegation led by Vice Premier Liu He this week could salvage the deal, according to a Reuters report.
If tariffs do go up to a full 25% on Chinese goods, it could start to impact U.S. companies' earnings growth and consumer confidence going forward, Raymond James' Adam said.
"If the companies absorb the increased cost, it could potentially hamper earnings growth, and if it goes onto the consumer, that's like a tax. That could hamper some consumer sentiment," he said.
However, some market participants believe the impact from higher tariffs would be somewhat limited to the broad market.
"An increase in the tariff rate probably wouldn't result in a complete breakdown in negotiations and as a result the S&P 500 should be able to hold at 2850 or above," said Adam Crisafulli, a J.P. Morgan managing director. "There is still a huge swath of Chinese imports not subject to tariffs and this will form the basis of additional talks."
Intel's stock tanked on Wednesday afternoon after the chipmaker said it expects low single-digit revenue growth over the next three years.
Ride-hailing company Lyft's stock slid 10.84% Wednesday after the company reported a heavy loss for itsfirst quarterly earnings report as a public company. Yet some Wall Street analysts still believe the results were "a good first step' to profitability."
The corporate earnings season is wrapping up with 88% of the S&P 500 companies having reported their first-quarter earnings. Disney and Fox will report after the closing bell Wednesday. Shares of Disney were up 1.16% ahead of the earnings report.
Through Tuesday's close, earnings are beating Wall Street expectations by 6.7%, with 73% of companies exceeding their bottom-line estimates, according to Credit Suisse.
— CNBC's Patti Domm and Silvia Amaro contributed to this report.