Wednesday September 19th

19-09-2018

Stock futures inch lower, but S&P 500 poised to trade near record

U.S. stock-index futures pointed to slight losses for Wall Street at the open on Wednesday, as investors took a breather following a rally in the previous session that returned major indexes near all-time highs. Trade policy will also remain in focus amid signs of escalating tensions between the U.S. and China, the world’s two largest economies. Futures for the Dow Jones Industrial Average slipped 19 points to 26,282, a decline of 0.1%. Futures for the S&P 500 slid 4 points to 2,907.75, a dip of 0.2%. Nasdaq-100 futures lost 11 points, or 0.2%, to 7,513. Stocks rose solidly on Tuesday, with major indexes posting their biggest percentage gain of the month. The Dow DJIA, +0.42%  rose 0.7% while the S&P 500 SPX, +0.07%  gained 0.5% and the Nasdaq COMP, -0.15%  rose 0.8%. It was an unusually sizable move for the major averages, which have been mostly seeing slight day-to-day activity. Based on Tuesday’s close, the S&P is 0.4% below record while the Dow is 1.4% below its own all-time high. The Nasdaq is 2.2% shy of its record. Trading on Wall Street has been relatively quiet given the earnings season is largely over and there have been few major economic indicators released this week. That has left an opening for markets to be driven by the latest developments on trade. On Tuesday, President Donald Trump reiterated his hard stance on China during a news conference with Polish President Andrzej Duda and said the U.S. had “no choice” but to levy another $267 billion in duties on China. The move comes on top of announced tariffs on about $200 billion in Chinese goods late Monday; Trump also threatened additional penalties as part of his campaign to pressure Beijing to change its commercial practices. In response, China retaliated with tariffs of 5% to 10% on $60 billion worth of U.S. products that will take effect Sept. 24 and said it may introduce more measures if the U.S. goes ahead with higher tariffs. Jack Ma, the founder of Alibaba Group, said a trade war between the U.S. and China could last “maybe 20 years” and that “it’s going to be a mess.” While many are concerned that a full-blown trade war will become a huge headwind to global economic growth, investors have repeatedly shrugged off the issue over the past several months, choosing instead to focus on signs of improving economic fundamentals. In the latest economic data, the U.S. current-account deficit, a measures of the nation’s debt to other countries, fell 17% in the second quarter. “We could be near peak political trade rhetoric, but without any visible effect on economic data, investors are just looking through the noise. We’re essentially still in a negotiation phase, and until we have set policies that we can evaluate, markets will continue to ignore this to a certain extent,” said Matt Forester, chief investment officer of BNY Mellon’s Lockwood Advisors. “The U.S. environment remains very positive, and there’s a big difference between the sensitivity of the stock market to trade — which is most important to large U.S. stocks — and the sensitivity of the overall economy.” Asia markets mostly rose on Wednesday as investors took an escalation of trade tensions between the U.S. and China in their stride. Japan's Nikkei 225 was up 1.08 percent to close at 23,672.52, and the Topix index added 1.46 percent to close at 1,785.66. The Bank of Japan kept its monetary policy steady and maintained an upbeat view on the economy. Chinese mainland markets were up: the Shanghai composite gained 1.14 percent to 2,730.85 in closing, and the Shenzhen composite added 1.35 percent to close at 1,423.22. Hong Kong's Hang Seng Index gained 1.19 percent to close at 27,407.37. In South Korea, the Kospi finished near flat, dropping 0.02 percent at 2,308.46. Oil steadied on Wednesday, as concerns that producers may fail to cover a shortfall in supply once U.S. sanctions on Iran come into force outweighed an increase in U.S. inventories. Brent crude futures were down 19 cents at $78.84 a barrel by 9:31 a.m. ET (1331 GMT), having gained 1.3 percent on Tuesday following media reports that Saudi Arabia, the world's largest oil exporter, was comfortable with prices above $80. U.S. crude futures were up 38 cents, or half a percent, at $70.23, after gaining 1.4 percent the day before. Gold prices rose on Wednesday along with equities as the U.S. dollar softened, with markets showing little worry over the latest escalation in the U.S.-China trade war. Spot gold climbed 0.5 percent to $1,203.48 an ounce. U.S. gold futures were up 0.4 percent at $1,208.20 an ounce.