U.S.-China Trade Standoff Weighs on Stocks
June 18 2018 - 4:29PM
Dow Jones News
By Georgi Kantchev and Allison Prang
The Dow Jones Industrial Average fell Monday as escalating trade
tensions between the U.S. and China weighed on investors' appetite
for risk.
Last week's back-and-forth over tariffs exacerbated worries
among investors that the world's two biggest economies could
descend into a trade war.
Concerns about the fate of the North American Free Trade
Agreement and tariffs that the Trump administration imposed on
European allies also are adding to investor anxiety.
"Trade continues to weigh on the market, and the China tariffs
are a big deal," said Lindsey Bell, investment strategist at CFRA
Research. "It could get worse before it gets better."
The blue-chip index fell 103.01 points, or 0.4%, to 24987.47.
The S&P 500 dropped 5.79 points, or 0.2%, to 2773.87, while the
Nasdaq Composite rose 0.65 point, or less than 0.1%, to
7747.03.
Many investors still expect the U.S. and China to continue
talking, and so far the repercussions for global growth are seen as
limited. Analysts at Deutsche Bank estimate the impact of the
announced U.S. tariffs on China's economy would be less than 0.1%
of China's gross domestic product this year.
However, if the U.S. imposes additional tariffs, as Mr. Trump
has threatened, the impact would rise to 0.3%, according to the
bank.
Kristina Hooper, chief global strategist for Invesco, said trade
is a concern for markets but also noted stocks have an "upward
bias." The Federal Reserve's hawkish stance last week, however,
could affect that, she said.
It's "not just an increase in rate-hike expectations, but it's
also an increase in balance-sheet normalization," she said. "It's
getting more significant."
Investors need to diversify their portfolios to protect against
downturns, she said.
Some investors advised against reading too much into summer
moves. Linda Duessel, senior equity strategist for Federated
Investors, said "the market is just doing its summertime thing" and
that it "lacks catalysts." Years with midterm elections also tend
to be "sloppy" until the fourth quarter.
"It's taking a pause on its way to break through the highs and
for very likely a strong year-end," she said.
Shares of energy companies in the S&P 500 stood out Monday,
adding 1.1% -- the most of the index's 11 sectors -- as oil prices
climbed.
U.S. crude oil rose 1.2% to $65.85 a barrel as investors awaited
a key producer meeting between the Organization of the Petroleum
Exporting Countries and other major suppliers later this week.
The S&P 500's telecommunications sector -- a group of three
companies -- dropped 2%, driven by a decline in AT&T shares of
96 cents, or 2.9%, to $32.19. The company completed its deal to buy
Time Warner last week, after it won a court battle with the Justice
Department, which wanted to stop the deal.
Outside of the U.S., both the Stoxx Europe 600 and Nikkei Stock
Average closed down 0.8%.
Write to Georgi Kantchev at georgi.kantchev@wsj.com and Allison
Prang at allison.prang@wsj.com
(END) Dow Jones Newswires
June 18, 2018 17:14 ET (21:14 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.