Stocks Lose Gains as Geopolitical Tensions Linger
12 December 2018 - 6:51AM
Dow Jones News
By David Hodari and Akane Otani
U.S. stocks erased their early gains Tuesday as investors
weighed signs of progress in trade talks between Washington and
Beijing against broader concerns about slowing growth.
The Dow Jones Industrial Average slipped 167 points, or 0.7%, to
24255 after rising more than 300 points earlier in the trading
session. The S&P 500 declined 0.4% and the Nasdaq Composite
lost 0.3%.
The afternoon's moves marked the latest reversal for the stock
market. Futures had rallied early Tuesday after President Trump
said on Twitter that "very productive conversations" were happening
around trade. Shares of auto makers also rose after China agreed to
reduce tariffs on U.S. cars to 15%, down from the current 40%.
Still, as the day progressed, major indexes slipped into
negative territory. Some of the selling came after Mr. Trump
sparred with top Democrats, threatening to shut down the government
if Congress did not fund construction of his proposed border
wall.
Between lingering geopolitical tensions and signs of slowing
growth around the world, many investors say they are heading into
2019 with muted expectations. BlackRock cautioned in its annual
investment outlook that negative returns across both stocks and
bonds -- a relatively rare phenomenon -- could become more common
as the bull market ages.
"The fragility of the market stems from the awareness that 2019
will not look anything like 2018 in terms of earnings and economic
growth," said Art Hogan, chief market strategist at B. Riley
Financial. "Investors are getting used to this idea that this could
be as good as it gets."
Companies that have become barometers for investors' sentiment
around trade talks fell after an initial rally, with Caterpillar
and Deere losing around 0.6% apiece.
Apple shares lost 0.9% as the company tried to get a Chinese
court to reconsider its decision to ban sales of older iPhones in
China.
The court ruling added another source of friction in the trade
skirmish between the world's two largest economies, as did the
recent arrest in Canada of a top executive at Chinese firm Huawei
Technologies.
Elsewhere, the Stoxx Europe 600 rose 1.5%, reversing course
after U.K. Prime Minister Theresa May's postponement of a crucial
Brexit vote in Parliament Monday sent shares sliding. Ms. May's
shock decision to pull the vote further diminished many investors'
willingness to bet on U.K. assets, some said.
"If you're a macro investor, you're going to get blown out of
the water by events like yesterday's," said John Wraith, head of
U.K. rates strategy at UBS. "It makes investors incapable of
trading those markets with any conviction whatsoever, so you see a
lot of fund managers staying neutral and keeping their exposure to
a minimum."
Shares in Asia were mixed, with India's Nifty 50 index slumping
1.9% after the governor of its central bank unexpectedly resigned
from his post.
Central banking policy was also a subject of focus in the U.S.,
where data showed producer prices -- another gauge of inflation --
rising for the third consecutive month.
Investors and analysts widely expect the Federal Reserve to
raise short-term interest rates when it meets next week, with CME
Group data suggesting the market is pricing in a 78% probability of
a rate increase.
Any forward guidance out of the Fed will be closely scrutinized,
especially since some investors believe Chairman Jerome Powell has
conveyed mixed messages over recent months. Mr. Powell jolted
markets after suggesting rates weren't close to neutral and then
subsequently appearing to backtrack on those remarks.
"I think he got a bit ahead of himself saying that we're not
close to neutral," said Mark Heppenstall, chief investment officer
at Penn Mutual Asset Management. "I think that was language we
weren't prepared for and it helped tip the market. Now I think
you'll see his language more focused on gradual patience."
Write to David Hodari at David.Hodari@dowjones.com and Akane
Otani at akane.otani@wsj.com
(END) Dow Jones Newswires
December 11, 2018 14:36 ET (19:36 GMT)
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