WEDNESDAY – U.S. stocks were lower Wednesday as worries over U.S.-China trade relations dampened sentiment around a record-setting rally.
The Wall Street Journal reported, citing former Trump administration officials, that the ongoing trade talks could hit an impasse that would derail a so-called “phase one” trade deal. Uncertainty around trade also grew after the Senate passed a bill supporting Hong Kong protesters. This led China to accuse the U.S. of interfering in domestic affairs.
The Dow pulled back from record highs on Tuesday amid losses from Boeing and Home Depot while investors monitored earnings and developments in the U.S.-China trade talks. There is lingering uncertainty among investors about the possibility of a deal between both countries, despite comments last month suggesting they were close to signing a partial agreement.
Elsewhere, investors are awaiting minutes from the Federal Reserve’s October policy meeting at 2 p.m. The U.S. central bank decided to lower the federal funds rate by 25 basis points to a range of 1.5% to 1.75% late last month.
In corporate news, Target shares jumped more than 8% in the premarket after the retailer posted quarterly results that easily beat expectations. Target also raised its full-year profit outlook.
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– Stocks slipped on Wednesday as investors digested mixed
news around U.S.-China trade talks along with testimony from the
highest-ranking Federal Reserve official.
The Dow Jones
Industrial Average traded lower a fraction of a percent. The S&P 500
dipped 0.3% while the Nasdaq Composite also slid 0.3%.
S&P 500 and Nasdaq both notched intraday records in the previous
session. The Dow came within a hair of its all-time high on Tuesday.
U.S. and China are reportedly at loggerheads over tariffs as they seek
to conclude phase one of their trade deal. The Wall Street Journal
reported Tuesday night, citing people familiar with the talks, that the
impasse is on whether the U.S. should remove existing tariffs or would
only cancel duties that are set to take effect on Dec. 15.
Fed Chairman Jerome Powell will address the Congressional Joint
Economic Committee later in the day. In prepared remarks, he said the
path of Fed interest rates is unlikely to change as long as the economy
On the data front, the U.S. consumer price index rose more than expected in October. The index increased by 0.4% last month, the Labor Department said. Economists polled by Reuters expected a gain of 0.3%.
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FRIDAY – Stocks hovered around the flatline on Friday but remained on track for solid weekly gains after trade optimism sparked a massive rotation out of bonds and lifted equities to record levels.
The Dow Jones Industrial Average traded 38 points lower, or 0.1%. The S&P 500 slid 0.1% while the Nasdaq Composite climbed 0.3%.
Disney was among the best-performing stocks on Wall Street after the company released its latest quarterly figures. Health care was the best-performing sector in the S&P 500, gaining 0.4%.
The major averages were poised to extend their weekly winning streaks despite Friday’s muted performance amid an improving tone around global trade
The Dow is up 1.1% week to date. The S&P 500 and Nasdaq Composite are up 0.6% and 0.8%, respectively, for the week. It would be the third straight week of gains for the Dow while the S&P 500 headed for its fifth straight weekly gain. The Nasdaq was on pace for a six-week winning streak.
Sentiment was also boosted this week by corporate earnings results that have generally beaten expectations. Of the 425 S&P 500 companies that have reported thus far, 74% have beaten estimates.
U.S. stock index futures turned sharply
higher Thursday after China said the world’s two largest economies had
agreed to remove existing trade tariffs.
Around 8:30 a.m. ET, Dow
Jones Industrial Average futures were up 154 points, implying an
opening gain of 138 points. S&P 500 and Nasdaq 100 futures also
pointed to solid gains.
The gains put the Dow and S&P 500 on track to reach fresh record highs at the open.
Feng, a ministry spokesperson for China’s Commerce Ministry, said that
both sides had agreed to simultaneously cancel some existing tariffs on
one another’s goods, according to the country’s state broadcaster. The
ministry spokesperson said that both sides were closer to a so-called
“phase one” trade agreement following constructive negotiations over the
past two weeks.
One important condition for a limited trade
agreement, Feng insisted, was that the U.S. and China must remove the
same amount of charges at the same time.
On the data front, the latest weekly jobless claims numbers came in at 211,000, down slightly from 218,000 in the previous week.
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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.