By Chris Matthews, MarketWatch , Joy Wiltermuth
Alibaba, Baidu shares sink
U.S. stocks slid lower Friday, closing out a second week of
losses, as investors weighed a report that the Trump administration
is considering potential curbs on U.S. portfolio investments into
China.
(https://www.bloomberg.com/news/articles/2019-09-27/us-china-trade-war-latest-us-weighs-limits-on-portfolio-inflows)
Investors also kept an eye on U.S. mixed economic data and the
geopolitical implications of whistleblower complaint against
President Donald Trump who is facing an impeachment inquiry in
Congress.
What are major indexes doing?
The Dow Jones Industrial Average lost 70.87 points or 0.26%, to
26,820.25, while S&P 500 index lost 15.83 points, or 0.53%, to
trade at 2,961.79. The Nasdaq Composite Index gave up 91.03 points,
or 1.13%, at 7,939.63.
The Dow on Thursday gave up 79.59 points, or 0.3%, to end at
26,891.12, while the S&P 500 lost 7.25 points or 0.2%, to
finish at 2,977.62. The Nasdaq closed at 8,030.66, down 46.72
points, or 0.6%.
For the week, the Dow shed 0.43%, the S&P 500 retreated
1.01%, while the Nasdaq lost 2.19%.
What's driving the market?
The Trump administration has been discussing ways to curb U.S.
portfolio inflows into China, according to Bloomberg News
(https://www.bloomberg.com/news/articles/2019-09-27/white-house-weighs-limits-on-u-s-portfolio-flows-into-china-k12ahk4g),
a crackdown that could hit billions worth of investments and
escalate the Sino-American trade war.
U.S. stocks retreated as investors studied the potential impact
of the news, which could signal a significant ratcheting up of
U.S.-China tensions ahead of planned talks in mid-October over
trade issues.
"It's going to be watch-and-see," said Marc Pfeffer, Chief
Investment Strategist at CLS Investment, adding that any plans by
Trump to impinge on U.S. flows of capital into China's market would
be a "dangerous foray into a totally different venue" of the
ongoing U.S.-China dispute.
But Pfeffer also cautioned that Trump officials simply might be
looking for leverage against China ahead of scheduled trade
negotiations, particularly at a time when he could appear weakened
by the impeachment proceedings.
Check out: Emerging markets offer useful lessons for market
impact of impeachment, says analyst
(http://www.marketwatch.com/story/emerging-markets-offer-useful-lessons-for-market-impact-of-impeachment-says-analyst-2019-09-27)
Shares of New York listed Chinese bellwether Alibaba Group
Holdings, Inc. (BABA) lost 5.15%, while Baidu, Inc. (K3SD.SG) gave
up 3.67%. Both are considered barometers for Chinese stocks that
trade in the U.S.
In early trade, stocks were up following a CNBC report that top
U.S. and Chinese negotiators are set to meet Oct. 10-11 in
Washington
(https://www.cnbc.com/2019/09/26/china-trade-talks-set-to-resume-oct-10.html),
with Chinese Vice Premier Liu He to lead the delegation from
Beijing. Also, news reports said Chinese officials have talked
about increased purchases of U.S. goods.
On Thursday, the weaker tone was tied in part to a news report
that the Trump administration was unlikely to extend a waiver that
allows U.S. companies to make sales to China telecom firm Huawei,
potentially stoking trade tensions. Skeptics said they still need
convincing after numerous swings between conciliation and
escalation over the course of the U.S.-China trade battle
stretching back to spring of last year.
The sudden twist on the trade front likely came as no surprise
to investors who had taken initial optimism over the October
meeting plans with a grain of salt.
"We have been here before," said Bas van Geffen, quantitative
analyst at Rabobank.
Fundamental issues, including China's approach to intellectual
property rights, remain unaddressed so far, van Geffen said in a
note, adding that Trump may be reluctant to create the appearance
he's growing soft on China ahead of the 2020 elections, a risk he
runs if an intermediate deal doesn't sufficiently address
fundamental U.S. concerns.
"We are not convinced that renewed trade talks will lead to the
results the market may once again be hoping for, and any optimism
ahead of the October meeting may be fleeting," he said.
Investors also sifted through mixed U.S. economic data published
Friday, which included disappointing estimates of consumer spending
growth. The Commerce Department estimated
(http://www.marketwatch.com/story/consumer-spending-barely-rises-in-august-as-americans-save-more-2019-09-27)
that consumer spending rose 0.1% in August, versus expectations of
a 0.3% rise, according to a MarketWatch poll of economists. Incomes
rose 0.4%, also below forecasts of 0.5%, and indicating Americans
saved much of their gains last month.
"Income growth was solid, but spending was disappointing, that
tells me that people and companies are getting defensive and
preparing for uncertain times," Mike Loewengart, vice president of
investment strategy at E-Trade told MarketWatch.
Core personal-consumption expenditure (PCE) inflation, the
Federal Reserve's preferred measure of price growth, advanced 0.1%
month-over-month, while the annual rate rose from 1.7% to 1.8%,
still below the Fed's 2% goal.
Orders for durable goods rose by 0.2% in August
(http://www.marketwatch.com/story/durable-goods-get-boost-from-pentagon-in-august-but-business-investment-still-weak-2019-09-27),
above the 0.7% decline expected by economists polled by
MarketWatch, but excluding defense orders, they fell 0.6%. Core
capital orders, an important measures of corporate capital
investment, fell 0.2% in August, continuing a trend of weakness
seen for much of the year.
The University of Michigan revised its index consumer sentiment
upwards in September, from 92 to 93.2, though the index is trending
downward broadly.
"The economic data today was skewed toward the positive side and
it helped," said Paul Zemsky, chief investment officer at Multi
Asset Strategies, in an interview. "It takes some of the fear out
of the market."
In U.S. politics, a whistleblower report released on Thursday
alleged that President Donald Trump attempted to coerce Ukraine to
investigate Democratic rival Joe Biden, and that White House
officials acted to conceal evidence of his actions. The controversy
around the report prompted House Democrats this week to launch a
formal impeachment inquiry.
The whistleblower report and impeachment concerns have had only
a fleeting, at most, effect on markets so far, analysts said, but
could become a factor
(http://www.marketwatch.com/story/heres-how-a-move-towards-impeaching-trump-might-hurt-investors-says-allianz-2019-09-25)
if the outlook for Trump's presidency darkens.
Two Fed speakers were on investor radars Friday. Randal Quarles,
the Federal Reserve vice chairman for banking supervision, said the
economy is "solid"
(https://www.cnbc.com/2019/09/27/feds-quarles-economy-solid-despite-uncertainty-over-us-trade-policy.html)
despite trade uncertainty, at a Georgetown University event in
Washington, while Philadelphia Fed President Patrick Harker said
the central bank should hold firm on rates right now
(https://www.wsj.com/articles/fed-s-harker-fed-should-hold-firm-on-rates-right-now-11569603845),
in a speech in New York.
Which stocks are in focus?
On the corporate front, Wells Fargo & Co.(WFC) announced
Friday that it hired Charles Scharf as chief executive
(http://www.marketwatch.com/story/wells-fargo-names-charles-scharf-its-new-ceo-who-previously-led-bank-of-new-york-mellon-2019-09-27),
ending a six-month search for a new chief. Scharf was most recently
chairman and CEO of Bank of New York Mellon Corp. (BK).
Shares of Micron Technology Inc.(MU) ended lower after the
memory-chip maker reported another large earnings decline
(http://www.marketwatch.com/story/micron-stock-falls-as-forecast-disappoints-earnings-continue-to-plunge-2019-09-26)
and predicted a disappointing holiday season.
Pfizer Inc. (PFE) stock rose after the pharmaceutical giant
reported favorable results in a second late-stage trial of a
treatment for moderate to severe atopic dermatitis, a chronic skin
disease.
How are other markets trading?
The yield on the 10-year U.S. Treasury note fell less than a
basis points to 1.678%.
In commodities markets, oil futures declined on Friday as
traders weighed conflicting reports on Iranian oil sanctions,
(http://www.marketwatch.com/story/oil-lower-after-saudi-arabia-reportedly-moves-to-impose-partial-yemen-cease-fire-2019-09-27)
with President Donald Trump denying claims that the U.S. offered to
remove all sanctions on Tehran in exchange for talks.
(http://www.marketwatch.com/story/oil-lower-after-saudi-arabia-reportedly-moves-to-impose-partial-yemen-cease-fire-2019-09-27)The
price of West Texas Intermediate crude oil for November delivery
fell 50 cents to $55.91 per barrel on the New York Mercantile
Exchange.
Gold prices ended the week with a loss on Friday on the back of
overall strength in the U.S. dollar, but held ground above the key
$1,500-an-ounce mark. Gold for December delivery fell $12.10 to
$1,503.10 an ounce.
In Asia, stocks traded mixed, with the China CSI 300 rising
0.3%, Japan's Nikkei 225 retreating 0.7% and Hong Kong's Hang Seng
Index falling 0.3%. European stocks were mostly higher, as measured
by the Stoxx Europe 600 .
(END) Dow Jones Newswires
September 27, 2019 16:25 ET (20:25 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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