Stocks Pare Tariff-Related Losses as Investors Still Hope for a Deal
06-May-19 16:20 ET
Dow -66.47 at 26438.48, Nasdaq -40.71 at 8123.27, S&P -13.17 at 2932.47
briefing.com
[BRIEFING.COM] The S&P 500 declined 0.5% on Monday, although it had dropped as much as 1.6% after threats from President Trump to increase China tariffs fueled concerns about a trade deal. Investors regrouped to buy the dip, though, lifting stocks off their lows on hopes that a trade deal will still be secured.
The Dow Jones Industrial Average lost 0.3%, and the Nasdaq Composite lost 0.5%. The domestically-oriented Russell 2000 managed to finish higher by 0.1%.
President Trump said on Sunday that he will increase tariffs on $200 billion of imported Chinese goods to 25% from 10%, effective Friday. An additional $325 billion of imported goods could also face a 25% tax. The news rattled equity markets around the world and catalyzed a 5.6% drop in China's Shanghai Composite.
The worst levels in the U.S., however, came at the beginning of the day as all 11 S&P 500 sectors traded lower. Buying interest throughout the day contributed to a steady advance off early lows.
Many market participants viewed President Trump's threat more as a negotiation tactic to speed up trade talks than a move prevent the completion of a trade deal. Confidence that President Trump would not try to upend a market coming off session highs by jeopardizing a deal supported a reversal in stocks. China reportedly said it still plans to send a trade delegation to Washington this week.
There is increased uncertainty, though, which contributed to the underperformance of the S&P 500 materials (-1.4%), industrials (-1.0%), and information technology (-0.8%) sectors. These sectors contain many companies with Chinese exposure. The health care sector (+0.6%) was the lone group to finish higher.
The energy sector (-0.1%) showed relative strength following positive reactions to Occidental Petroleum (OXY 58.77, +0.82, +1.4%) revising its offer to acquire Anadarko Petroleum (APC 75.49, +2.77, +3.8%) to include more cash. Shares of Chevron (CVX 118.40, +1.13, +1.0%) also outperformed on the news, as its likely defeats its proposal to acquire Anadarko for a premium.
A turnaround in oil prices ($62.31/bbl, +0.38, +0.6%) amid rising tensions between the U.S. and Iran also provided some support for the energy space.
U.S. Treasuries finished higher but lost steam as equities regained buying interest. The 2-yr yield declined one basis point to 2.31%, and the 10-yr yield declined three basis points to 2.50%. The U.S. Dollar Index finished little changed at 97.53.
Investors did not receive any economic data on Monday.
Looking ahead, investors will receive the JOLTS - Job Openings survey for March and the Consumer Credit report for March on Tuesday.
- Nasdaq Composite +22.4% YTD
- Russell 2000 +19.8% YTD
- S&P 500 +17.0% YTD
- Dow Jones Industrial Average +13.3% YTD
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