U.S. Market Gains Erased as Trade Hopes Are Dashed

No Trade Resolution Imminent, Says Top White House Economic Advisor: U.S. Market Gains Erased as Trade Hopes Are Dashed

Brand new anxieties and concerns amongst investors Friday, as the Dow Jones Industrial Average on Friday afternoon was trading near its lowest level of the session. Unresolved trade tensions between China and the U.S. are still having a major effect on investors’ confidence and behavior, as The Dow was down 300 points and the S&P 500 declined 1.4 percent, with the Nasdaq Composite Index following suit, down 1.7 percent as well.

The hurting continues especially after Larry Kudlow, top economic adviser for President Donald Trump refuted a report from Bloomberg News that said the president requested a drafting of a U.S.-China trade accord, during an interview on CNBC. Hopes that a resolution to the trade dispute was nearing seem to be drafted by the economic advisor’s comments. Kudlow did confirm that Trump and Chinese leader Xi Jinping would indeed be meeting later this month, however.

Stocks Extended Losses

Stocks extended losses following the news, with the trade-sensitive industrial sector falling to a session low, which was up as much as 1.13 percent earlier.

After a dismal October, in which the U.S. Markets took an absolute beating, with the Nasdaq losing more than 10 percent of its value, falling in correction territory. There has been a relative surge at the beginning of November, until Kudlow’s comments on the lack of a U.S.-China trade accord. Trade clashes between Beijing and Washington remain one of the biggest drivers of the stock market moves over the past several months, and there doesn’t seem to be an end in sight.

Some attribute the Bloomberg News’ report that there was progress in the U.S.-China trade dispute as the main factor, which injected optimism into the market, causing a 300-point rise over the last three days. However, the market is reacting negatively once again as Kudlow refuted the report, as the Dow has given up all of its earlier gains. Investors also have harbored doubts about the timing of upbeat reports on imminent trade pacts ahead of an important midterm election on November 6.

Most in the know on President Trump’s trade discussions with China suggest that there is, “a long way to go” when it comes to making Trump’s “great deal” with China.

Most recently, it appears that President Trump’s trade actions created a major drag on trade in the first half of this year before activity levels started to recover as the U.S. was making progress in negotiating deals with Canada, Mexico, Europe, and South Korea.

Trade With China

Trade issues have been at the center of Wall Street’s concerns because they have the potential to ripple into every other issue that has been besieging investors if it continues to escalate. If Kudlow’s comments ring true, and there is no trade accord drafted and ready to be presented to Chinese officials, then the trade worries certainly won’t be going away any time soon. That includes the growth outlook for U.S. corporations, an economic slowdown in China, the pace of rate hikes and the health of the U.S. economy and stock market.

Investors can continue to expect a 25 percent tax on over $250 billion worth of Chinese goods being imported into and out of China in 2019, as well.

Along with the gains in the U.S. stocks being hindered, the global market's gains were also curtailed after they lifted emerging stocks by their largest daily gain since 2016.

“The stock market is focused on tariffs and they believe that increased tariffs are going to hurt the economy,” said Mike Rask, director of trading at Hodges Capital in Dallas. “There was the belief overnight that we were close to a trade deal with China and now it looks like that is not the case.”

U.S. Job Growth

Even as U.S. job growth rebounded sharply in October and wages recorded their largest annual gain in 9 and half years, pointing to further labor market tightening that could keep encouraging the Federal Reserve to raise interest rates again in December, potentially adding to investors’ concerns and lack of confidence in the market.

And despite a seemingly healthy market with policies that should be hindering precious metals and spot gold prices, gold still remains at an attractive $1,232.55 an ounce with little change amidst and market full of dips and fluctuations.

Palladium also experienced a 1.19 percent increase at the end of the week, with a $1,097.80 per ounce tag.