By Chris Matthews, MarketWatch , Joy Wiltermuth
IMF likely to lower global growth forecast further Tuesday
U.S. stocks closed slightly lower Monday during the Columbus Day
holiday as investors concluded the trade deal with China announced
Friday will not lead to significantly lower trade barriers or
foster global economic growth in the near term.
How did the major benchmarks fare?
The Dow Jones Industrial Average fell 29.23 points, or 0.11% to
26,787.30, while the S&P 500 index lost 4.12 points, or 0.14%,
at 2,966.15, while the Nasdaq Composite Index , shed 8.39 points,
0.10%, at 8,048.65. That was their largest one-day percentage
declines since Oct. 8, according to Dow Jones Market data.
On Friday, the Dow rose 319.92 points, or 1.2%, to 26,816.59,
the S&P 500 advanced 32.14 points, or 1.1%, to 2,970.27, while
Nasdaq gained 106.26 points, or 1.3%, to 8,057.04.
What drove the market?
Investors were sceptical that an agreement hammered out between
the U.S. and China last week would do little to restore business
investment or revive manufacturing after the imposition of import
tariffs in the past two years disrupted global supply lines and
raised input costs.
While a rise in U.S. tariffs on Chinese imports due Tuesday was
shelved after President Trump announced a partial deal late Friday,
no White House decision has been made yet on a planned new 15%
tariff set to go into effect on Dec. 15 on about $160 billion in
annual Chinese imports. U.S. Treasury Secretary Steven Mnuchin told
reporters on Monday
(https://www.cnbc.com/2019/10/14/mnuchin-says-he-expects-tariffs-to-go-up-in-december-if-there-is-no-china-deal-in-place.html)
(https://www.reddit.com/r/personalfinance/comments/dhkedi/how_could_i_safely_invest_400k_to_enable_me_to/)
that if a deal isn't in place by December, those tariffs will go
ahead, but he also said, "I expect we will have a deal."
Hu Xijin, the influential editor-in-chief of China's
state-controlled Global Times (http://www.globaltimes.cn/), tweeted
that China's attitude about a deal remains "positive":
(https://twitter.com/HuXijin_GT/status/1183736136276951041)
As part of the deal, the U.S. postponed a planned tariff
increase on $250 billion in Chinese imports to 30% from 25%,
originally set to take effect Tuesday, in exchange for Chinese
promises to buy $40 to $50 billion in American agricultural
products annually though that would be double the $24 billion China
bought in 2017.
(https://www.reuters.com/article/us-usa-trade-china-agriculture/trumps-hailing-of-50-billion-in-chinese-farm-purchases-seen-as-meaningless-idUSKBN1WT0TG?il=0)
Earlier Bloomberg reported
(https://www.bloomberg.com/news/articles/2019-10-14/china-wants-more-talks-before-signing-trump-s-phase-one-deal-k1q8bxgz?utm_content=business&utm_source=twitter&utm_campaign=socialflow-organic&utm_medium=social&cmpid=socialflow-twitter-business)
Monday that China wants further discussions as soon as the end of
October, to smooth out details of the so-called "Phase 1" trade
deal announced by President Donald Trump that will delay a tariff
hike, boost Chinese agricultural purchases and address foreign
currency levels. The agreement was set out only in principle, and
not in writing.
"Certainly, we've been on this roller coaster before with the
suggestion that a resolution is around the corner, but then find
out there are several more corners behind this one," said John
Carey, a portfolio manager and director of U.S. equity income at
Amundi Pioneer Asset Management, in an interview with MarketWatch.
"There was concern optimism might be premature."
A bigger trade deal will come over time in three stages,
(https://www.wsj.com/articles/china-emerges-with-wins-from-u-s-trade-truce-11570912439)
according to Trump, with more divisive issues to be addressed
later. These include Chinese practices that the U.S. alleges but
Beijing denies, such as forced transfers of U.S. technology to its
economic rival.
"As a practical matter these are only small concessions on both
sides and a comprehensive deal between China and the U.S. may well
have to wait until after next November's U.S. elections,"
J.P.Morgan analyst David Kelly wrote. "However, the fact that the
negotiators were so anxious to announce a deal suggests that both
sides now appreciate the damage being done to their economies by
the conflict. This probably reduces the risk of a re-escalation of
the war in the months ahead."
Meanwhile the new IMF head, Kristalina Georgieva, sees a
"serious risk" the global economic slowdown will spread, and on
Tuesday the IMF is likely to cut its 2019 global growth forecast
from 3.2%, already the weakest since 2009.
Investors also were eyeing developments in negotiations over
Britain's exit from the European Union, after optimism that a deal
could be reached rose Friday following productive negotiations
(http://www.marketwatch.com/story/brexit-hopes-fuel-fresh-rally-for-the-british-pound-2019-10-11)
between U.K. Prime Minister Boris Johnson and Irish Prime Minister
Leo Varadkar on the difficult question of the customs border
between Britain's Northern Ireland and the Republic of Ireland.
The British pound , however, retreated Monday
(http://www.marketwatch.com/story/pound-pulls-back-from-three-month-highs-as-hopes-dim-over-brexit-agreement-2019-10-14),
after the European Commission said late Sunday that "a lot of work
remains to be done" to finalize Brexit, while questions remain as
to whether British Parliament will accept a deal negotiated by
Johnson.
Investors also braced for the start of the U.S. corporate
earnings reporting season, with major banks set to report Tuesday.
Citigroup , Goldman Sachs (GS), J.P. Morgan Chase (JPM) and Wells
Fargo (WFC) are all scheduled to release their results from the
previous quarter.
Analysts expected third-quarter earnings for the S&P 500 to
have fallen 4.6% on a year-over-year basis, according to
FactSet.
Trading volumes were lower due to the U.S. Columbus Day holiday
which closes federal government offices and the U.S. Treasury bond
market but leaves the stock and commodities markets open.
Which stocks were in focus?
Shares of Dow component Boeing Co. (BA) fell 0.46% after the
company's board said late Friday it voted to separate the roles of
chief executive and chairman as the company has struggled to deal
with issues related to the groundings of its 737 Max jet.
The aviation company said Dennis Muilenburg will continue as
CEO, president and a board member, while David Calhoun, the current
independent lead director, will become non-executive chairman.
Fellow Dow constituent Nike Inc.'s (NKE) stock added 1.07% after
it was upgraded to neutral
(http://www.marketwatch.com/story/nike-sportswear-jordan-brand-drive-upgrade-at-bank-of-america-2019-10-14)
from underperform by Bank of America Merrill Lynch, based on a
bullish outlook for the company's sportswear business.
Shares of Fastenal Co. (FAST) fell 2.25% Monday after the stock
was downgraded to "market perform" from a "strong buy" by Raymond
James. The stock rallied 17.2% Friday
(http://www.marketwatch.com/story/fastenals-stock-rockets-toward-best-day-in-19-years-after-earnings-beat-2019-10-11)
after the company reported better than expected earnings for the
quarter ended Sept. 30.
Sempra Energy(SRE) announced Monday that it would sell its
equity stakes in its Chilean businesses for $2.23 billion in cash
to State Grid International Development. Shares closed slightly
lower by 0.04%.
Parsely Energy Inc. (PE) shares declined after it
(http://www.marketwatch.com/story/parsley-energy-to-buy-jagged-peak-in-an-all-stock-deal-valued-at-23-billion-including-debt-2019-10-14)(PE)announced
(http://www.marketwatch.com/story/parsley-energy-to-buy-jagged-peak-in-an-all-stock-deal-valued-at-23-billion-including-debt-2019-10-14)
the acquisition of Jagged Peak Energy Inc. (JAG) in an all-stock
transaction.
Shares of Aecom(ACM) gained Monday after the infrastructure
company said its selling it's management services business
(http://www.marketwatch.com/story/aecom-shares-jump-premarket-on-news-to-sell-management-services-business-for-2405-billion-2019-10-14)
to American Securities LLC and Lindsay Goldberg for $2.405
billion.
How did other markets trade?
In commodities, crude oil prices fell $1.10 to $53.59 on the New
York Mercantile Exchange. Gold futures rose $8.90 to $1497.60 an
ounce ahead of the Federal Reserve's planned T-bill buying spree
(http://www.marketwatch.com/story/gold-prices-rise-after-fed-announcement-the-start-of-a-massive-bond-buying-program-2019-10-14).
The U.S. dollar , meanwhile, ended 0.22% higher against a basket of
its peers.
In Asia overnight
(http://www.marketwatch.com/story/asian-markets-rise-on-relief-over-partial-us-china-trade-deal-2019-10-13)
Monday, the China CSI 300 rose 1.06%, while Hong Kong's Hang Seng
index added 0.81%. Markets in Japan were closed for a holiday. In
Europe, shares were mostly lower
(http://www.marketwatch.com/story/european-stocks-slink-back-on-warier-view-of-us-china-brexit-talks-2019-10-14),
as evidenced by the 0.49% decline in the Stoxx Europe 600 index
.
(END) Dow Jones Newswires
October 14, 2019 16:27 ET (20:27 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.