FRIDAY – Stock index futures tanked on Friday morning, as investors feared President Donald Trump’s surprise threat of tariffs on all Mexico imports, amid a worsening trade war with China, could risk sending the U.S. economy into a recession.
Around 8:25 a.m. ET, Dow Jones Industrial Average futures indicated a drop of 270 points at the open. Futures on the S&P 500 and Nasdaq dropped by more than 1% each. The S&P 500 was already down 5.3% this month through Thursday after trade talks fell apart with China and rhetoric on both sides worsened in May.
The closely watched 10-year Treasury yield dropped to lows not seen since 2017. The U.S. benchmark was yielding 2.17% Friday morning. It was above 2.5% at the beginning of the month. Mexico’s currency, the peso, tanked against the dollar by more than 2% to trade at 19.6 per dollar.
On Thursday evening, Trump announced the U.S. would impose a 5% tariff on all Mexican imports from June 10 until illegal immigration across the southern border was stopped.
The trade war appears to be dragging down the Chinese economy. The country’s manufacturing activity contracted more than expected in the month of May, China government data out overnight showed. The official manufacturing Purchasing Managers’ Index (PMI) for May was 49.4, down from April’s reading of 50.1. PMI readings below 50 signal contraction.
– A sharp sell-off will start the week on Wall Street
after President Donald Trump said on Sunday that the U.S. will hike
tariffs on goods imported from China, casting doubt on recent optimism
that the world’s two largest economies were close to a resolution to
their trade battle.
Dow Jones Industrial Average futures dropped
457 points as of 8:32 a.m. ET which implied an opening decline of about
440 points. S&P 500 futures lost 1.5% and Nasdaq-100 Index futures
China’s stock markets, meanwhile, fell sharply. The
Shanghai Composite dropped 5.6% while the Shenzhen A Shares index
plunged more than 7%.
Trump said in a tweet Sunday afternoon that
the current 10% levies on $200 billion worth of Chinese goods will rise
to 25% on Friday. He also threatened to impose 25% tariffs on an
additional $325 billion of Chinese goods “shortly.”
The S&P 500, up 17.5% in 2019 alone, notched a record close on Tuesday. The tech-heavy Nasdaq Composite, which has soared more than 20% this year, clinched a record close on Friday. The S&P 500 is set to drop 1.5% on Monday, which would be its biggest one-day decline since March 22, when it dropped 1.9%.
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– Markets in Japan, South Korea and China traded higher on
Friday while other Asia Pacific markets, including Australia, Hong
Kong, Singapore and Indonesia, were closed for a public holiday.
The Nikkei 225 in Japan rose 0.5% to 22,200.56 as a number of tech stocks posted gains, with Nintendo shares jumping 14.12%.
Thursday, Chinese tech giant Tencent won an important approval to start
selling the Nintendo Switch game console in China, one of the largest
video games market in the world, Reuters reported. The Switch was first
released in 2017. U.S.-listed Nintendo ADRs rose more than 12% in the
In the currency market, the dollar index, which
measures the greenback against a basket of its peer, traded at 97.363,
climbing from levels near 96.900 earlier in the week. The Japanese yen
traded at 111.90 to the dollar, weakening from levels near 111.20 in the
Oil prices ticked up overnight following declines in crude exports from Saudi Arabia. Global benchmark Brent rose about 35 cents to $ 71.97 a barrel while U.S. crude was up 24 cents to $64.
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MONDAY – U.S. stocks were lower Monday, with the market perhaps worried about what is likely to be a tougher earnings season.
At around 8:35 a.m. ET, Dow Jones Industrial Average futures indicated a negative open of more than 100 points. Futures on the S&P 500 and Nasdaq 100 were both marginally lower.
Market focus is largely attuned to corporate results, with major U.S. banks set to get the ball rolling later in the week.
Analysts have warned that the upcoming earnings season could be the first quarter of contracting corporate results since 2016.
J.P. Morgan Chase and Wells Fargo are both set to report their latest figures on Friday.
Before that, minutes from the Federal Reserve’s last meeting are due to be released on Wednesday.
Following the Fed’s most recent meeting in March, the central bank decided to maintain interest rates and hold off on any further increases this year.
On the data front, factory orders for February will be published at around 10 a.m. ET.
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SUNDAY – Stocks posted their second weekly rise on Friday as stocks were boosted by better-than-expected jobs data and progress on the U.S.-China trade front.
The S&P 500 and Dow Jones Industrial Average both rose about 2% this week, while the Nasdaq Composite jumped 2.7%. On Friday, the S&P 500 and Nasdaq closed up by 0.5% and 0.6%, respectively.
Materials and financials were the best-performing sectors this week, rising 4.3% and 3.3%, respectively. Bank shares led the gains in financials. Morgan Stanley rose more than 6% this week, while Goldman Sachs, Bank of America and Citigroup all ended the week up more than 5%.
The U.S. economy added 196,000 jobs in March, according to data released on Friday by the Bureau of Labor Statistics. Economists polled by Dow Jones expected 175,000. The U.S. unemployment rate, meanwhile, remained at 3.8%. However, wage growth expanded 3.2% just below an expected gain of 3.4%.
Wall Street was looking forward to this report after the previous jobs data showed growth of just 20,000. That number was revised higher to 33,000 on Friday.
Friday’s strong jobs report comes after the release of disappointing economic data earlier in the week. Activity in the U.S. services sector fell to its lowest level since August 2017 while payrolls data released on Wednesday was also below expectations.
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THURSDAY – U.S. stock index futures fell on Thursday morning as investors digested the Federal Reserve’s latest announcement on monetary policy as well as a sharp drop in Biogen shares.
At 7:48 a.m. ET, Dow Jones Industrial Average futures indicated a decline of 136 points at the open. Futures on the S&P 500 and Nasdaq 100 also fell.
The Dow closed lower on Wednesday after the Fed announced a more dovish policy. Jerome Powell, the Fed’s chair, said the central bank is forecasting no rate hikes in 2019, which is down from two hikes forecast earlier. U.S. Treasury yields fell on the news, which added pressure on certain stocks, including banks.
Rising rates are good for banks since they are able to lend out money to investors at a profitable rate of interest. Lower interest rates restrict the bank’s ability to make profits thus adding pressure on margins.
The central bank also lowered its growth outlook for the year and indicated it would end its balance-sheet reduction process by the end of September.
U.S.-China trade is also in focus for investors after mixed comments from the White House. President Donald Trump said Wednesday that Washington’s tariffs on Beijing could stay on for a “substantial period of time.”
WEDNESDAY – U.S. stock indexes barely moved on Wednesday as shares of FedEx fell while investors awaited a policy decision by the Federal Reserve.
At 10:00 a.m. ET, Dow Jones Industrial Average was down just about 100 points. S&P 500 and Nasdaq 100 were also little changed.
Concerns over global growth and U.S.-China trade talks were also renewed to keep stock gains subdued.
Bloomberg News reported some U.S. officials are worried China could walk back on some concessions. However, The Wall Street Journal said U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin both plan to travel to Beijing next week for another round of negotiations with Chinese Vice Premier Liu He. These reports buffeted stocks on Tuesday.
The world’s two largest economies have imposed tariffs on billions of dollars’ worth of one another’s goods over the past year, battering financial markets and souring business and consumer sentiment.
In Asia, MSCI’s broadest index of Asia-Pacific shares, excluding Japan, dipped 0.4 percent.
No economic data are expected on Wednesday, however, on the earnings front, General Mills is set to report its results before the bell and Williams-Sonoma will report after the bell.
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SUNDAY – Stocks posted strong weekly gains, led by tech shares, as investors cheered renewed optimism on the U.S.-China trade front on Friday.
The Dow Jones Industrial Average climbed 138.93 points to 25,848.87 as Boeing shares turned around to close 1.5 percent higher. Boeing’s turnaround was sparked by a report saying the company planned to roll out a software upgrade for its 737 Max aircraft. The stock had been under pressure all week after an Ethiopian Airlines flight using a 737 Max plane crashed on Sunday, which prompted several countries to ground flights involving the plane.
Gains in the tech and consumer discretionary sectors pushed the S&P 500 up 0.5 percent to 2,822.48. Tech shares also bolstered the Nasdaq Composite, which climbed 0.8 percent to 7,688.53.
The S&P 500 and Nasdaq Composite both rose at least 2.9 percent, though the laggard Dow gained only 1.7 percent amid Boeing’s troubles. The S&P 500 also posted its biggest one-week gain since November.
Stocks have been on a tear this year, with the three major indexes rising more than 10 percent each in 2019.
This week’s gains were largely led by tech shares, as the sector surged 4.9 percent. The tech sector also became the best-performer of 2019. Nvidia was the best-performing stock in the sector, rising more than 12 percent while fellow semiconductor stocks like Broadcom and Lam Research also rose sharply this week.
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FRIDAY – Stocks fell on Friday after the U.S. government released employment data that badly missed expectations, adding to growing concerns that the global economy may be slowing down.
The Dow Jones Industrial Average pulled back 215 points as Caterpillar and Chevron lagged. The S&P 500 fell 0.8 percent as the energy and tech sectors both dropped more than 1 percent. The Nasdaq Composite slid 1.1 percent.
The U.S. economy added just 20,000 jobs in last month, marking the weakest month of jobs creation since September 2017. Economists polled by Dow Jones expected a gain of 180,000.
Treasury yields fell along with futures. The benchmark 10-year rate dipped to 2.619 percent while the 2-year yield traded at 2.45 percent.
Equities were on track to post rare weekly losses. The major indexes were all down more than 1.9 percent entering Friday’s session. The Nasdaq was on pace to snap a 10-week winning streak, while the Dow was set to notch its second weekly decline of the year.
The weekly decline comes amid growing fears that most of the positive news on the U.S.-China trade front may be baked in. At this point, most investors expect the two countries to strike a trade deal later this month. There are also worries that a deal may not be sure thing.
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THURSDAY – Stocks fell on Thursday after the European Central Bank slashed its economic growth forecast for 2019 and announced a new round of stimulus to help banks in the region, stoking worries over the global economy.
The Dow Jones Industrial Average traded 246 points lower as shares of 3M and United Technologies lagged. The S&P 500 fell 0.7 percent, led by declines in the industrials and materials sectors. The Nasdaq Composite dropped 0.8 percent. The indexes were headed for their fourth consecutive loss.
Both the Nasdaq and S&P 500 also broke below their 200-day moving averages, levels that are closely watched by traders.
ECB President Mario Draghi said the central bank cut its growth estimate to 1.1 percent, down from a 1.7 percent expansion forecast released in December.
Thursday’s moves come after the major indexes posted their third straight day of losses, with investors eager to know details from trade negotiations between the U.S. and China.
Stocks are still up sharply for the year despite Thursday’s losses. The S&P 500 and Nasdaq have both risen more than 10 percent while the Dow is up more than 9 percent.