Stock market futures are well in the red this morning following another escalation in the trade war between the United States and China. Shares of semiconductor manufacturer NVIDIA (NVDA) are significantly lower following the news that the company will take a $5.5 billion quarterly charge related to the export of its H20 graphics processors. In a recent filing, the company stated that it was told by the government in China that it would require a license to send these chips from the U.S. to China. This is notable, considering NVIDIA is a major component of the Dow Jones Industrial Average, S&P 500, and NASDAQ. Other chipmakers and tech stocks were down, as well. In economic news, retail sales for March came in better than expected, expanding 1.4% year over year, showing that the U.S. consumer has continued to spend. Still, the futures are suggesting a weak start to the trading day.
The stock market started trading higher yesterday, benefiting from strong earnings results from a few large banks. However, this positive price action was short-lived, and the markets trended downward through much of the day as traders pared recent gains in the indices. By the end of the day, the major market averages finished slightly in the red. All told, the S&P 500 was off nine points (down 0.17%), the Dow Jones Industrial Average declined 156 points (down 0.38%), and the NASDAQ finished lower by eight points (down 0.05%). Market breadth was somewhat positive, with advancers outpacing decliners by a 1.2-to-1.0 ratio. Technology stocks were amongst the best performers yesterday, while consumer staples were amongst the weakest.
In commodity news, oil prices fell slightly yesterday, as traders priced in less energy demand due to less international trade, though this was partially mitigated by better-than-expected first-quarter GDP growth from China. Elsewhere, U.S. Treasury bond yields fell across the board as prices of the bonds rose. The Chicago Board Options Exchange Volatility Index, or VIX, commonly known as the fear index, declined yesterday, suggesting traders are pricing in less price volatility in the days ahead.
Several economic reports will come in the days ahead. These include initial jobless claims, housing starts and building permits for March, and the Philadelphia Fed manufacturing survey on Thursday. Additionally, a few Federal Reserve Regional Presidents, as well as Fed Chairman Powell, will give remarks on the broader economy later today. Elsewhere, earnings season is going into full swing, with several large companies reporting quarterly results in the coming days. This may give some insight into how these companies are faring, given the pressured operating environment. - John E. Seibert III
At the time of this article’s writing, the author held positions in none of the companies mentioned.
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