After The Close
The U.S. equity markets opened today’s session solidly to the upside, and largely added to those gains as the day wore on.
Traders appear to have put the latest trade escalations between the U.S. and China, aside, at least temporarily. On Monday President Trump announced a new series of tariffs on goods from the key trading partner, this time targeting another $200 billion in goods. What’s more, he warned of potential further levies down the line. Unsurprisingly, China responded with higher tariffs on U.S. goods, though it fell short of making it a dollar-for-dollar match.
In a sign that perhaps the markets have come to accept the ongoing brinkmanship as “business as usual”, the major stock indexes all moved higher throughout the day’s trade. At the closing bell, the Dow Jones Industrial Average had tacked on 185 points, or 0.7%, the broader S&P 500 was ahead by 15 (0.5%), and the tech-heavy NASDAQ was up by 60 (0.8%).
Most of the 10 major market sectors were firmly in positive territory for the day, with the biggest gains coming from energy, consumer cyclicals, and basic materials stocks, all up around a percentage point. On the other side of the coin, consumer noncylicals and utilities posted modest declines.
Elsewhere, oil prices moved higher, with light sweet crude gaining 1.4%, to $69.85 a barrel. Back in June, OPEC and other producers agreed to increase oil output by a million barrels a day. The move came ahead of U.S. sanctions against Iran, which are scheduled to go into effect in early November.
Lastly, the European bourses ended the day largely on the plus side. Germany’s DAX led the way with a gain of half a percentage point, while France’s CAC-40 was up by a quarter. The U.K. FTSE 100, meanwhile, ended a see-saw session just a hair below breakeven.
– Mario Ferro
At the time of this article's writing, the author did not have positions in any of the companies mentioned.
Before The Bell
As to the causes of the early selling, trade tensions were continuing to rise with China, with threats and counter-threats both by our nation and this competing economic powerhouse contributing to the unsettled nature of the business backdrop. At this time, it is unknown if the new tariffs will be tacked on before trade talks are set to begin or after, should there be no satisfactory resolution. In addition, there were concerns among chipmakers as to what the tariffs would do to demand. That was taking a toll on the likes of Apple and some semiconductor stocks.
The market then continued along this bifurcated trail into the early afternoon, so as we past the noon hour in New York, we saw that the Dow was off by just 20 points, but the NASDAQ was down by 65 points and the small-cap Russell 2000 was lower by about 10 points. The S&P 500 Index, on a five-day winning streak, also was down in morning trading. The big story remained the sense that China would retaliate in kind should the President impose $200 billion in tariffs on China as he has threatened.
The stock market then drifted about for the next couple of hours, holding within a narrow range on the Dow, but falling further on the NASDAQ. Then, as the final hour approached, there were new concerns about the escalating trade difficulties with China, stocks really hit the skids, falling to triple-digit-point losses on both the Dow and the NASDAQ. As before, Apple led the way lower on concerns about its large exposure to China, with that issue falling by some six points on the day.
There was no real letup in the final-hour selling, though the blue-chip composite did see a nominal spurt of buying in the final five minutes to pare the closing loss to 93 points. Still, it was the first loss for that index in five sessions, while the S&P 500 saw its initial pullback in six days. The NASDAQ, meantime shed 114 points and the small-cap Russell 2000 Index dropped 18 points, or more than 1%. Losing issues topped winning stocks on the Big Board by almost two-to-one, while the NASDAQ saw a larger gap.
Looking out on a new day now, and one that will again have its share of news on the festering trade difficulties with China, we see that stocks in Asia were trending higher overnight, despite escalating trade tensions between China and the United States, while in Europe, the trend is positive, as well, thus far this morning. Elsewhere, oil prices are up and yields on Treasury notes, which ended yesterday at 3.00%, are still at that level so far today. Finally, U.S. equities appear poised to start the second trading day of the week with solid gains even as trade tensions persist.
