By Chris Matthews and Mark DeCambre, MarketWatch

Geopolitical uncertainty continues to weigh on stocks

U.S. stock benchmarks on Wednesday edged lower, following on heavy losses Tuesday, as worries about a U.S.-China trade agreement dogged markets, resulting in the worst day for the Dow in about four months.

How are the benchmark indexes faring?

The Dow Jones Industrial Average was down 44 points, or 0.2%, at 25,907, the S&P 500 declined by 6 points, or 0.2%, to 2,879, while the Nasdaq Composite Index fell 22 points, or 0.3%, to 7,943.

Opinion:The S&P 500's return the next five years? Zero, says Mauboussin (http://www.marketwatch.com/story/the-sp-500s-return-the-next-five-years-zero-says-mauboussin-2019-05-08)

On Tuesday (http://www.marketwatch.com/story/us-stock-futures-lower-as-trade-tensions-stay-in-the-spotlight-2019-05-07), the Dow tumbled 473.39 points, or 1.8%, to 25,965.09, suffering its largest percentage decline since Jan 3, while the S&P 500 index dropped 48.42 points, or 1.7%, to 2,884.05. The Nasdaq Composite Index fell 159.53 points, or 2%, to 7,963.76.

The S&P 500 and Nasdaq saw their biggest daily declines since March 22, according to FactSet data.

Read:The stock market is on pace for its worst month since December rout (http://www.marketwatch.com/story/the-stock-market-is-on-pace-for-its-worst-month-since-december-routas-volatility-returns-with-a-vengeance-2019-05-07)

What's driving markets?

U.S. stocks are on track for their longest string of consecutive daily losses since a five-session skid ended March 8, as Sino-American tariff tensions have buffeted assets perceived as risky, catching many investors who had anticipated a tidy pact to the protracted talks coming to fruition soon.

U.S. Trade Representative Robert Lighthizer said Monday that the Trump administration will increase tariffs (http://www.marketwatch.com/story/lighthizer-accuses-china-of-reneging-on-promises-says-tariffs-will-rise-friday-2019-05-06) on $200 billion in Chinese goods early Friday. The prospect of higher tariffs had been first raised on Sunday by President Donald Trump, rattling investors who had anticipated better progress toward a near-term resolution between the two superpower

President Trump once again weighed in on the negotiations via Twitter Wednesday, saying that the Chinese are now "coming to the U.S. to make a deal," implying they had previously been slow-walking the negotiations in the hope that Trump would be voted out of office in 2020.

(https://twitter.com/realDonaldTrump/status/1126106540015071232)

(https://twitter.com/realDonaldTrump/status/1126106541004873730)

Read:With Trump threatening to tighten the trade screws, here's a look at what tariffs have done so far (http://www.marketwatch.com/story/with-trump-threatening-to-tighten-the-trade-screws-heres-a-look-at-what-tariffs-have-done-so-far-2019-05-06)

Indeed, Beijing has said top trade envoys, including Vice Premier Liu He, will head to Washington on Thursday to resume negotiations. U.S. officials had accused Beijing of reneging on its side of the bargain and threatened to raise tariffs on $200 billion of Chinese imports to 25% from Friday.

Reuters on Wednesday reported (https://www.reuters.com/article/us-usa-trade-china-backtracking-exclusiv/exclusive-china-backtracked-on-nearly-all-aspects-of-us-trade-deal-sources-idUSKCN1SE0WJ) that China's diplomatic contingent attempted to revamp a nearly 150-page draft trade agreement last Friday, as they were reluctant to agree to signing new trade terms into law, and raising the ire of U.S. negotiators and perhaps prompting a Sunday tweet from President Donald Trump, threatening higher import duties

Adding to policy uncertainty, Iran said Wednesday it may cease compliance (http://www.marketwatch.com/story/iran-says-it-wont-comply-with-backs-out-of-some-2019-05-08) with portions of a 2015 nuclear deal it signed with the U.S., Britain, France, Germany, China and Russia. Iranian President Hassan Rouhani said that it would begin stockpiling heavy water and low-enriched uranium unless non-U.S. signatories take steps to shield the Iranian economy from Trump-Administration sanctions that have been crippling its economy.

Also potentially weighing on markets are mixed signs on the global economy, with new trade data on out of China showing imports rising, but exports unexpectedly falling 2.7% (http://www.marketwatch.com/story/surprise-drop-in-chinas-exports-in-april-2019-05-07), suggesting that global economic weakness continues to be a threat with which U.S. investors must contend.

What are strategists saying?

"Traders are in no mood to take a stand right now as the uncertainties regarding China and Iran take center stage," wrote Bespoke Investment Group's Paul Hickey in a note.

"The flight to safety has provided a big boost for Treasurys, re-flattening the yield curve closer to the inversion zone," he added. "And to think, just three trading days ago, the S&P 500 was flirting with a record high close!"

"The overhang of tariffs continued to eclipse most other news Tuesday, and this time, the late-day rescue squad arrived a bit too late to clean up most of the carnage," wrote J.J. Kinahan, chief market strategist at TD Ameritrade, in comments after Tuesday's close of trade. He noted that most of the stocks that have driven the market's extended rally since January were the hardest hit.

But Kinahan said it's important to put into perspective that major equity benchmarks remain not far from records. Higher volatility is the most likely a byproduct of the current U.S.-China trade narrative, but may not be the only geopolitical headline with potential to unsettle.

"It seems like a long week, but it's only Tuesday. Barring some kind of major breakthrough overnight, it's possible Wall Street could open Wednesday morning with the same tariff overhang that weighed on it today. Another thing to consider is that as earnings season dies down, the tariff news might not have many rivals for headlines. Buckle up," he said.

Which stocks are in focus?

Lyft Inc. shares will be in focus Wednesday after the ride-hailing company reported quarterly earnings for the first time since its initial public offering in March. The company reported first-quarter losses that were wider than expected (http://www.marketwatch.com/story/lyft-reports-continuing-large-losses-in-first-earnings-since-ipo-but-sales-beat-expectations-2019-05-07), but revenue that topped expectations. The stock fell 0.9% Wednesday morning.

Opinion: Lyft stops providing key data after IPO, then insults investors' intelligence (http://www.marketwatch.com/story/lyft-stops-providing-key-data-after-ipo-then-insults-investors-intelligence-2019-05-07)

Shares of Coty Inc. (COTY) tumbled 5% Wednesday, after the company reported a narrower loss (http://www.marketwatch.com/story/coty-narrows-quarterly-loss-but-revenue-falls-short-2019-05-08) for the fiscal third quarter, ended March 31, than the previous three months, but revenue that fell 10.4%, below consensus expectations.

McKesson Corp. (MCK) stock rose 0.4% early Wednesday, after the supply-chain management company reported first-quarter earnings (http://www.marketwatch.com/story/mckesson-stock-up-13-after-company-posts-earnings-above-wall-street-expectations-2019-05-08) above expectations.

Shares of Wendy's Co. (WEN) rose 0.9%, after the fast-food chain reported first-quarter profits and sales that surpassed Wall Street forecasts.

Nautilus Inc. (NLS) stock fell 0.5% early Wednesday, after the exercise equipment maker reported a first-quarter loss of 29 cents per share, versus analysts expectations of just 3 cents per share, according to FactSet.

TripAdvisor Inc. (TRIP) reported earnings Tuesday evening, with the company posting first-quarter earnings that beat analyst expectations, but falling revenue (http://www.marketwatch.com/story/tripadvisor-stock-falls-more-than-7-after-company-misses-q1-sales-2019-05-07) that widely missed forecasts. The stock fell 7.2%.

Radio-frequency component maker Qorvo Inc. (QRVO) also reported results Tuesday evening (http://www.marketwatch.com/story/qorvo-stock-rallies-as-results-outlook-top-street-view-2019-05-07), announcing first-quarter sales and profits that beat Wall Street expectations. Shares rose 3% Wednesday.

Shares of Electronic Arts. Inc. (EA) rose 4.5% Wednesday, after the videogame maker reported better-than-expected net bookings (http://www.marketwatch.com/story/electronic-arts-stock-surges-after-strong-forecast-sales-2019-05-07) and strong fiscal 2020 forecast, late Tuesday.

Shares of Chesapeake Energy Corp. (CHK) fell 0.4% early Wednesday, after the oil and natural gas company reported a wider first-quarter loss and revenue that fell short of expectations.

What's on the economic calendar?

In a light day for economic data, Lael Brainard, member of the Federal Reserve Board of Governors, delivered a speech on the central bank's ongoing review of its monetary policy framework, which the Fed hopes will enable it to better deliver on its mandate to foster maximum employment that is consistent with price stability.

How are other markets trading?

In Asia (http://www.marketwatch.com/story/asian-markets-mixed-as-traders-weigh-us-china-trade-dispute-2019-05-06), the Shanghai Composite Index fell 1.1%, while the Nikkei 225 , in its second day from an extended holiday break, declined by a sharper 1.5%, following a similar drop on Tuesday. European stocks were mostly lower (http://www.marketwatch.com/story/europe-markets-higher-as-investors-shake-off-trade-fears-2019-05-08), with the FTSE 100 index down 0.3%.

Gold was trading higher (http://www.marketwatch.com/story/gold-at-one-week-high-as-stock-losses-look-to-persist-2019-05-08), while the U.S. Dollar Index declined (http://www.marketwatch.com/story/new-zealand-dollar-falls-after-central-bank-cuts-rate-us-dollar-slips-2019-05-08) and crude oil edged lower (http://www.marketwatch.com/story/us-crude-oil-climbs-up-from-roughly-one-month-low-as-iran-trade-deal-tensions-tug-at-market-2019-05-08).

 

(END) Dow Jones Newswires

May 08, 2019 09:54 ET (13:54 GMT)

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