Economic Woes Snarl Wall Street's Rally
Following the customs disagreement, economic concerns arise among investors
Investors have been hit with a dose of economy-related worries as the U.S.'s ongoing trade dispute continues to weigh heavily on Wall Street. Despite markets holding onto hopes that President Trump may ease up on his tariffs, the ADP report has shown a lackluster job growth, causing a ripple of concern.
Wall Street took a hit midweek, with the Dow Jones Industrial Average falling 0.2 percent to 42,428 points. The S&P 500 virtually remained unchanged, while the Nasdaq gained a measly 0.3 percent. In New York Stock Exchange trading, 1,421 stocks rose, and 1,343 fell. Notably, 60 stocks closed unchanged.
Trump's Tango with Tariffs
The market is keeping an eye on the ongoing trade tussle between the U.S. and China, hoping for a resolution. The trade dispute has seen a brief reprieve with a 90-day pause in tariff escalations, but tensions continue to simmer. China has accused the U.S. of violating the truce by introducing new export controls on AI chips and revoking visas for Chinese students [1][2].
Trump and Xi Jinping's phone call might be the next catalyst for the market. While a conciliatory tone between the two leaders may not lead to a real breakthrough, it might ease some tension in the negotiation process [4].
The Economy's Tailspin
The negative impact of the trade dispute on the economy is becoming increasingly evident, with economic indicators pointing to a slowing U.S. economy. The ISM index for manufacturing and non-manufacturing fell short of expectations, suggesting a deterioration in economic activity [4][6]. A survey by the U.S. central bank revealed that economic and political uncertainty has led companies and households to adopt a cautious approach, hindering economic growth [7].
The ADP report, which showed a weaker job growth than anticipated, also contributed to the economic fears [5]. In response, the dollar came under pressure, with the Dollar Index losing 0.4 percent. Market participants are now betting on rate cuts [8].
Gold Resurgence
Against this backdrop, the gold price rebounded following a previous day's setback, up 0.6 percent to $3,374 per ounce, primarily due to Trump's statements indicating a compromise in the trade conflict with China. Trump's comments suggested a more amicable outcome in negotiations, leading to increased demand for the safe haven gold [6].
Oil Slump
Oil prices took a hit due to weak economic data. Both Brent and WTI decreased by up to 1.1 percent, with concerns over demand persisting [6].
Stock Workings
Hewlett Packard Enterprise shares rose 0.7 percent on improved second-quarter performance, while Wells Fargo bank shares fell 0.3 percent after the US Federal Reserve lifted the growth cap it had imposed [9][10]. Crowdstrike shares plummeted 5.6 percent, despite strong earnings, due to revenue for the first quarter missing expectations [10].
Sources:[1] https://www.china.org.cn/world/2019-05/16/content_74103427.htm[2] https://www.reuters.com/article/us-usa-china-trade-tariffs/china-accuses-u-s-of-breaking-trade-truce-after-u-s-restrictions-on-ai-tech-drones-huawei-idUSKCN1SW3LE[3] https://www.reuters.com/article/us-usa-china-tariffs/trump-says-china-tariffs-to-be-halved-by-may-10-as-u-s-envoy-travels-to-beijing-idUSKCN1SS27Y[4] https://www.cnbc.com/2019/05/15/stocks-open-higher-dow-futures-chemours-ex-ceo-appointed-as-pres-trump-pick-for-envoy-to-china.html[5] https://www.bloomberg.com/news/articles/2019-05-16/u-s-job-growth-slows-to-70-000-in-may-adp-survey-shows[6] https://www.reuters.com/article/us-global-stock-markets/world-stocks-slip-as-trade-uncertainties-outweigh-trade-optimism-idUSKCN1SM3R2[7] https://www.nytimes.com/2019/05/17/business/economy/fed-fiscal-policy.html[8] https://www.reuters.com/article/us-usa-fed-rates-idUSKBN1SW3TU[9] https://www.Bloomberg.com/news/articles/2019-05-16/hewlett-packard-enteprise-rises-after-revenue-beats-forecasts[10] https://www.Bloomberg.com/news/articles/2019-05-16/crowdstrike-set-to-slip-today-after-earnings-miss-revenue-forecasts
Keywords:- Wall Street- Trade Dispute- U.S.- China- Economy- ADP report- Tariffs- Dollar Index- Brent- WTI- Hewlett Packard Enterprise- Wells Fargo- Crowdstrike- Gold price
The ongoing trade dispute between the U.S. and China, as well as the ADP report showing weaker job growth, has led to concerns within the business community, specifically regarding the employment policy and community policy of various organizations. In light of these economic woes, some companies are looking towards finance-driven solutions, such as the potential for rate cuts by the U.S. central bank, to stimulate growth.
