U.S. Stocks Fall as Trade Talks Flounder
November 20 2019 - 12:45PM
Dow Jones News
By Caitlin Ostroff and Gunjan Banerji
Global stocks slumped Wednesday as trade talks between the U.S.
and China appeared to near an impasse, with President Trump
threatening to raise tariffs further.
The Dow Jones Industrial Average dropped 230 points, or 0.8%, in
midday trading. The S&P 500 shed 0.8%. The Nasdaq Composite
lost about 1.1%, retreating from the record hit Tuesday.
Losses deepened and major U.S. indexes fell near session lows
after Reuters reported that the first phase of a trade deal between
the U.S. and China may not materialize by year-end. Trade has been
a key driver of market swings this year and the recent dash for
stock records had been driven, in part, by optimism on a final
deal.
Stocks in Europe and Asia also logged declines as investors grew
concerned that relations between the world's two biggest economies
may be further strained after the U.S. Senate passed a bill in
support of Hong Kong's antigovernment protesters.
The bill would require the U.S. Secretary of State to certify
annually that Hong Kong remained sufficiently independent from
Beijing to warrant the special status that has helped the city grow
into a global financial hub. China's Foreign Ministry said the act
was a violation of international law, while Hong Kong officials
said foreign legislatures shouldn't interfere with its internal
affairs.
"The Chinese aren't very happy about that bill progressing,"
said Paul Flood, multiasset portfolio manager at Newton Investment
Management. "It does make the tariffs discussion more
difficult."
A breakdown in the trade talks would derail the White House's
plans for a limited "phase one" agreement this year. Investors are
also growing jittery that fresh tariffs on Chinese products
including smartphones and toys may be put into effect Dec. 15,
directly hitting American consumers. Mr. Trump said in a Tuesday
cabinet meeting that China needs to make a deal he likes to avoid
levies going even higher.
In an interview on CNBC Wednesday, Federal Reserve governor Lael
Brainard highlighted that trade uncertainty has been pressuring the
economy.
Still, she said she sees the economy continuing to grow next
year.
The strength of the U.S. consumer was on display Wednesday as
corporate earnings drove swings among shares of individual
companies. Shares of Target climbed about 12% -- on track for a
fresh record -- after the retail chain posted another quarter of
rising sales as the company continued to draw more shoppers online
and in its stores.
Lowe's shares jumped about 4% after the home-improvement
retailer raised its profit forecast and disclosed plans to shut
some Canadian stores.
Yana Barton, an equity portfolio manager at Eaton Vance, said
she's optimistic about the stock market's near-term trajectory
after major indexes have hit a string of recent records. But, she
said "a lot of that really hinges on trade and moving from a
strategy of hope, to one that has actual meat around some kind of
resolution."
Urban Outfitters dropped 15% after the retailer's third-quarter
profit declined.
Meanwhile, the pan-continental Stoxx Europe 600 index fell 0.4%,
led by declines in almost every sector.
Investors reached for haven assets, sending the yield on 10-year
Treasurys to 1.736% Wednesday, according to Tradeweb, from 1.785%
Tuesday. Bond yields across Europe also fell, with the German
10-year bund recently yielding minus 0.368%, from minus 0.337%
Tuesday.
Later Wednesday, the Federal Reserve will issue its October
policy meeting's minutes, which may offer further clues about the
direction of future policy.
Write to Caitlin Ostroff at caitlin.ostroff@wsj.com and Gunjan
Banerji at Gunjan.Banerji@wsj.com
(END) Dow Jones Newswires
November 20, 2019 13:30 ET (18:30 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.