U.S. stocks fell Friday morning, though off session lows, after Chinese state media indicated little appetite by Beijing to resume trade talks following Trump administration’s move to raise tariffs on Chinese imports and to target tech giant Huawei.
Meanwhile, surprisingly strong data on consumer sentiment and a bullish reading of leading economic indicator helped stocks claw back some of their early-morning losses.
How are the major benchmarks performing?
The Dow Jones Industrial Average DJIA, +0.03% fell 24 points, or 0.1% to 25,838, while the S&P 500 index SPX, -0.10% lost 5 points, or 0.2%, to 2,871. The Nasdaq Composite Index COMP, -0.37% declined 24 points, or 0.3% to 7,875.
At session lows, the Dow fell 204.90 points, or 0.8%, to 25,657.78, while the S&P 500 fell as many as 22.09 points, also 0.8%, to 2,854.23. The Nasdaq fell 72.37 points, or 0.9%, to 7,826.38, at its nadir.
What’s driving the market?
A spokesman for China’s Ministry of Commerce called the Trump administration’s moves to raise tariffs last week, and the threat of additional tariffs on the roughly $300 billion in annually imported Chinese so far untouched by new duties, “bullying behavior,” that has resulted in “severe negotiating setbacks.”
Chinese state media also took aim at the Trump administration’s decision to put Chinese tech giant Huawei Technologies Co. on a list of entities that are working contrary to U.S. interests, which could result in U.S. companies needed to secure special permits to sell the company chips it relies on for end products.
See: Trump’s Huawei ban rattles shares of chip suppliers
State-run media, including the Communist Party’s People’s Daily and Xinhua News Agency, published scathing attacks on U.S. actions in recent days. “The U.S. has made an irrational act in trying to blackmail China with tariff hikes, which will be proven over time to be shortsighted and doomed to fail,” read an editorial in the Xinhua early Friday.
Meanwhile, Foreign Ministry spokesman Lu Kang, when asked about the editorial broadsides, said Friday that “because of certain things the U.S. side has done during the previous China-U.S. trade consultations, we believe if there is meaning for these talks, there must be a show of sincerity,” according to Reuters.
The Ministry of Commerce also said that the Chinese economy will be able to withstand the effects of new trade sanctions. “With many policy tools and adequate room for macro policies, China is confident and capable of coping with any difficulty or challenge,” a spokesman said, according to Xinhua.
Meanwhile, the British pound came under pressure after talks between the country’s Labour and Conservative parties ended without an agreement on how to leave the European Union, raising fears of a disorderly exit, potentially further adding to geopolitical uncertainty that has weighed on global equity markets.
What’s on the economic calendar?
Consumer sentiment rose to a 15-year high in May, according to the University of Michigan consumer sentiment index, which rose to 102.4, well above the 97.1 expected by economists polled by MarketWatch and April’s reading of 97.2
The Conference Board’s estimate of leading economic indicators rose for the third straight month in April to 112.1, up 0.2% from March, the group said Friday. The survey of economic conditions is a collection of forward-looking data that attempts to predict future economic growth.
What are analysts saying?
Weakness in stocks Friday is the result of investors “not being used to seeing [trade] negotiations happen right before our eyes,” JJ Kinahan, chief market strategist for TD Ameritrade, told MarketWatch. “With everything so out in the open, and because nobody has any real insight into the final results of negotiations, the market moves back and forth on every public statement.”
“Despite yesterday’s rebound during the EU and U.S. sessions we are still reluctant to trust a long-lasting reversal in risk appetite,” wrote Charalambos Pissouros, senior market analyst with JFD Group in a Friday note. “With the U.S. attacking China, and China willing to respond to any actions taken by the U.S., we cannot assume that the worst is behind us…we would like to see concrete ‘truce’ signals before we get confident that equities could scale back their recent losses.”
Which stocks are in focus?
Chinese coffeehouse chain Luckin Coffee Inc. LK, +33.53% will launch an initial public offering on the Nasdaq Stock Market Friday, after the Starbucks rival priced its shares at $17, with a plan to sell 33 million shares.
Shares of Pinterest Inc. PINS, -11.73% were down more than 9% early Friday, after the social media company announced Thursday evening that its first-quarter losses of $41.4 million were three times as large as analysts had expected.
Hewlett Packard Enterprise Co. shares rose 1.2%, after the company announced a deal to buy supercomputer manufacturer Cray Inc. CRAY, +18.38% for $1.3 billion.
Shares of Deere & Co. fell 4.8% Friday, after the agriculture, construction and turf care equipment maker reported fiscal second-quarter earnings that missed expectations and provided a downbeat outlook.
Semiconductor firm NvidiaCorp. NVDA, -0.37% rose 0.4%, after it reported earnings Thursday evening that beat severely lowered expectations for the first quarter. Nvidia, however, declined to reiterate a fully year forecast while indicating that demand for the data-center market remains week.
Share of Applied Materials Inc. AMAT, +4.63% were up 5.1% Friday morning, after the chip-and-display maker beat the consensus revenue and earnings expectations for the first quarter, in a Thursday-evening release.
How are other markets trading?
Stocks in Asia closed mostly lower Friday, with the Shanghai Composite Index falling 2.5% and Hong Kong’s Hang Seng Index declining 1.2%. Japan’s Nikkei added 0.9%. European stocks were under pressure, with the Stoxx Europe 600 retreating 0.6%.
In commodities markets, the price of crude oil CLM9, +0.48% was on the rise, while gold GCM9, -0.81% was edging lower. The U.S. dollar DXY, +0.15% was virtually unchanged.
https://www.marketwatch.com/story/stock-index-futures-point-lower-putting-rebound-in-danger-after-china-casts-doubt-on-further-trade-talks-2019-05-17
2019-05-17 14:49:00Z
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