By Joe Wallace 

A climb in shares of Pfizer boosted the Dow Jones Industrial Average Wednesday after news the drugmaker had reached a procurement deal with the U.S. government for a potential coronavirus vaccine the company is developing with BioNTech.

The blue-chip index gained 59 points, or 0.2%, to around 26899. The S&P 500 swung between small gains and declines and was recently up less than 0.1%, and the Nasdaq Composite slipped 0.3%.

Pfizer shares rose 2.8%. Under the agreement, the U.S. government would receive 100 million doses of a Covid-19 vaccine candidate jointly developed by Pfizer and BioNTech and could acquire up to 500 million additional doses.

Global stocks and futures had turned lower after China's Foreign Ministry said the U.S. had instructed China to close its consulate in Houston. That raised the specter of an escalation in tensions between the governments of the world's two largest economies and prompted Beijing to condemn the move as outrageous and unprecedented. Both the yuan and shares in Hong Kong dropped.

"On the face of it, like the scale of the virus, this is a very serious development," said Richard McGuire, head of rates strategy at Rabobank. "Sentiment has been knocked, but only modestly, given this further escalation of tensions between two of the world's superpowers."

President Trump this month dimmed hopes of a phase-two trade deal with China, saying the relationship between the two countries had been too badly damaged by the pandemic. China is considering retaliating against the Chinese operations of two European telecommunication-equipment manufacturers if the European Union follows the U.S. in barring Huawei Technologies from 5G networks, The Wall Street Journal reported this week.

Among investors' other concerns: Senate Majority Leader Mitch McConnell said Tuesday that Congress is unlikely to pass a new fiscal stimulus bill quickly. The White House and Senate Republicans are struggling to bridge divisions on a payroll-tax cut, school funding and other issues.

Some of the giant technology companies that have driven much of the stock market's recovery since March are also poised to report quarterly earnings on Wednesday. Investors will get fresh cues about the outlook for the sector when Microsoft, whose shares have risen 34% in 2020, reports results for its fourth quarter after the close of trading.

"For Microsoft, expectations are probably quite high," said Hani Redha, a portfolio manager at PineBridge Investments. "There will be some sense of how well cloud [computing] in particular has fared."

Also due to publish earnings Wednesday: Tesla. The electric-vehicle maker's shares have soared in recent months, in part on increased expectations that it will report a fourth straight quarterly profit. That could qualify Tesla for inclusion in the S&P 500.

Shares in Snap dropped 8.5% after the company reported slowing revenue growth in the second quarter. Shares in Spotify Technology rose 7% after The Wall Street Journal reported that the streaming company had reached a new licensing agreement with Vivendi's Universal Music Group.

HCA Healthcare's shares gained 12% after the company reported higher profits in the second quarter.

In a sign of investors' continued caution, the yield on 10-year Treasury notes slipped to 0.586%, according to Tradeweb, from 0.606% Tuesday. The drop in yields suggests fund managers expect tepid inflation and weak growth.

"The bond market is much more pessimistic than the equity market, and I think the equity market is right," said Patrik Lang, head of equity research at Swiss private bank Julius Baer. China's quick economic recovery shows U.S. growth could also pick up quickly once coronavirus is under control, according to Mr. Lang.

U.S. crude fell 1.3% to $41.39 a barrel.

The rising tension between the U.S. and China weighed on markets overseas. The regional Stoxx Europe 600 index fell 1%. Hong Kong's flagship Hang Seng Index dropped 2.3%. The mainland Chinese Shanghai Composite Index, which closes earlier, had gained 0.4%.

Ken Wong, a portfolio manager at Eastspring Investments, said the news "created a lot of uncertainty" and fueled the selloff.

--Xie Yu and Karen Langley contributed to this article.

Write to Joe Wallace at Joe.Wallace@wsj.com

(END) Dow Jones Newswires

July 22, 2020 11:37 ET (15:37 GMT)