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Trump Volatility in Markets Is Back Trump Volatility in Markets Is Back
(about 2 hours later)
After weeks of relative calm and record highs, stocks in the United States fell Tuesday after President Trump’s comments on his China trade war unnerved investors and brought back the market volatility that has become a signature of the dispute between the world’s two largest economies. After weeks of relative calm and record highs, stocks in the United States fell Tuesday after President Trump’s comments on his China trade war rattled investors and revived some of the market volatility that has become a signature of the dispute between the world’s two largest economies.
Speaking in London, where he is attending a NATO summit, Mr. Trump hinted that he was ready to wait until after the 2020 election to come to terms with China. During a wide-ranging appearance with Jens Stoltenberg, the NATO secretary general, Mr. Trump tamped down hopes that an agreement would be struck before the end of the year, telling reporters: “I have no deadline, no.” Speaking in London, where he was attending a NATO meeting, Mr. Trump hinted that he was ready to wait until after the 2020 election to come to terms with China. During a wide-ranging appearance with Jens Stoltenberg, the NATO secretary general, Mr. Trump tamped down hopes that an agreement would be struck before the end of the year, telling reporters: “I have no deadline, no.”
On Wall Street, the remarks sent stocks sharply lower. The biggest drops came in energy and technology shares, which are sensitive to the outlook for both the trade war and the global economy, which is showing clear signs of slowing down. On Wall Street, the remarks sent stocks lower. After falling more than 1 percent in early trading, the S&P 500 recovered a bit to finish the day down 0.7 percent.
The S&P 500 was on track for its worst loss since Oct. 8. The biggest drop was in energy shares, which are sensitive to the outlook for both the trade war and the slowdown in the global economy. Benchmark prices for American crude oil rose 0.3 percent to $56.10 a barrel.
For much of the last few months, trading has been characterized by incremental upward moves that, over time, produced solid gains for investors.
The S&P 500 rose 2 percent in October, and 3.4 percent last month. Those gains, however, have come with little indication that the fundamental outlook for corporate earnings or the economy has improved markedly, leaving stocks vulnerable to a pullback. For much of the last few months, stocks have inched upward, producing solid gains for investors.
The early days of December suggest that pullback may have arrived, as investors have grown restless about the lack of tangible progress toward completing the so-called Phase 1 trade deal that was announced in October. The S&P 500 rose 2 percent in October, and 3.4 percent last month, in part because of rising confidence among investors that the Trump administration would want to make progress on the trade fight heading into an election year.
Now, the looming imposition of another 15 percent tariff that the Trump administration planned for Dec. 15 is forcing investors to think hard about whether it’s a good time to take some of this year’s gains off the table. Year to date, stocks have enjoyed a strong year. The S&P remains up more than 20 percent in 2019. Some major American companies have recorded huge gains. In tech, which has been under heavy public and political scrutiny, Apple is up 60 percent and Facebook has surged 50 percent so far this year. Global conglomerate General Electric is also up 50 percent. That climb, however, came with little indication that the fundamental outlook for corporate earnings or the economy has improved markedly, leaving stocks vulnerable to a pullback.
The levy scheduled to go into effect later this month could be a heavier hit to the economy as it would touch another $160 billion of Chinese goods, including consumer products such as smartphones, laptops and footwear. That could weaken what is currently the key pillar of growth for the United States: consumer spending. In the early days of December, some fear the pullback has arrived. Investors have grown restless about the lack of progress toward the so-called Phase 1 trade deal that was announced in October.
Recent updates on other areas of the economy have suggested ongoing weakness. On Monday, a key gauge of activity in the American industrial economy showed the sector contracted in November for the fourth consecutive month. “That narrative of ‘Trump is definitely going to want to move toward resolution because 2020 is 12 months away’ is being questioned,” said Michael Purves, the chief executive at Tallbacken Capital Advisors, a market strategy and research firm.
In the first two trading days of December, stocks have fallen about 2 percent. That sell-off likely recalls painful memories for investors. Last year, stocks were hammered by a 9 percent sell-off in December that culminated in a Christmas Eve plunge that nearly marked the end of the more than decade-old bull market for stocks. Now, the looming imposition of an additional 15 percent tariff that the Trump administration planned for Dec. 15 is forcing investors to think hard about whether it’s a good time to take some of this year’s gains off the table.
Tuesday’s sell-off struck overseas markets in addition to the United States. France’s CAC 40 and Britain’s FTSE 100 both dropped nearly 1 percent. The S&P 500 remains up more than 23 percent in 2019. Some major American companies have recorded huge gains. In tech, which has been under heavy public and political scrutiny, Apple is up 64 percent and Facebook has surged nearly 52 percent so far this year. The global conglomerate General Electric is also up 51 percent.
In Asia, China’s currency slipped following Mr. Trump’s remarks. The tax scheduled to go into effect this month could be a heavier hit to the economy than previous rounds of tariffs. It would touch a further $160 billion of Chinese goods, including consumer products like smartphones, laptops and footwear. That could weaken what is currently the key pillar of growth for the United States: consumer spending.
Investors moved money to the safety of American Treasury bonds, pushing prices up, and yields down. The yield on the 10-year Treasury note was down about 1.70 percent at 11 a.m., a sharp drop from the previous day. Crude oil prices slipped slightly. Recent updates on other areas of the economy have suggested weakness. On Monday, a key gauge of industrial activity was weaker than expected, showing the sector contracted in November for the fourth consecutive month.
The Associated Press provided additional reporting. “I think there’s a little bit of a concern that we are just lagging the weakness in the global economy, and maybe we’re slowing down a little now,” said Michael O’Rourke, the chief market strategist at JonesTrading in Stamford, Conn.
In the first two trading days of December, stocks have fallen about 1.5 percent. That sell-off may provoke painful memories for investors. Last year, stocks were hammered by a 9 percent sell-off in December that culminated in a Christmas Eve plunge that nearly marked the end of the more than decade-old bull market for stocks.
Tuesday’s sell-off struck overseas markets in addition to the United States. France’s CAC 40 fell 1 percent and Britain’s FTSE 100 fell nearly 1.8 percent.
In Asia, China’s currency slipped after Mr. Trump made his remarks.
Investors moved money to the safety of American Treasury bonds, pushing prices up, and yields down. The yield on the 10-year Treasury note finished at 1.71 percent, a sharp drop from the previous day. Falling bond yields typically are seen to reflect declining expectation for economic growth and inflation among investors.
The Associated Press contributed reporting.