Stocks closed higher as investors digested recent trade comments from the Trump administration and remarks from a Federal Reserve official pointing toward future gradual interest rate hikes.
The S&P 500 (^GSPC) rose 0.33%, or 8.75 points, as of market close. The Dow (^DJI) ticked up 0.44%, or 108.49 points, after spending much of the day in the red. The Nasdaq (^IXIC) edged slightly higher by 0.01%, or 0.85 points.
Investor sentiment was put under pressure overnight and earlier in the day Tuesday after the Wall Street Journal published an interview with President Donald Trump that indicated he would likely move ahead with bumping up tariffs on Chinese goods to 25% from the current 10% rate. He also suggested that he would impose tariffs on the remaining $267 billion worth of Chinese imports not currently impacted by the tariffs if trade talks with President Xi Jinping did not generate a fair trade deal.
These further measures could include a 10% tariff on Apple (AAPL) devices, which are currently exempt from tariffs, Trump said. The comments sent the tech giant’s stock tumbling by about 2% before paring losses. Shares of Apple are down about 20% in November.
Trump and Xi will meet over dinner Saturday evening in Buenos Aires at the G20 summit. The Trump administration has relaunched talks with the Chinese government ahead of the meeting, White House economic advisor Larry Kudlow told reporters Tuesday.
Earlier Tuesday, Federal Reserve Vice Chairman Richard Clarida offered an upbeat outlook on the U.S. economy during remarks in New York and said he believes the central bank should take a “gradual” approach to future rate hikes. Interest rates are “much closer” to neutral – a level that neither stimulates nor cools the economy – than they had been when the central bank began removing accommodation starting in December 2015, he said.
“How close is a matter of judgment, and there is a range of views on the FOMC,” Clarida said in prepared remarks. The process of learning about the neutral fed funds rate and natural rate of unemployment “as new data arrive supports the case for gradual policy normalization, as it will allow the Fed to accumulate more information from the data about the ultimate destination for the policy rate and the unemployment rate at a time when inflation is close to our 2% objective,” Clarida said.
Two weeks ago, Clarida said he believed a neutral policy rate would fall somewhere between 2.5% and 3.5%, while the current range is between 2% and 2.25%. Investors widely believe that the Federal Open Market Committee will hike interest rates for a fourth time in 2018 at their December meeting.
Federal Reserve Chairman Jerome Powell will speak at the Economic Club of New York on Wednesday.
STOCKS: GM’s stock falls after Trump threatens to slash subsidies
President Donald Trump assailed General Motors (GM) in a series of Twitter posts on Tuesday, threatening to cut “all GM subsidies” after the automaker on Monday announced plans to slash production in several American facilities and cut 15% of its salaried workforce. Consumers can currently take advantage of a $7,500 tax credit for all-electric vehicles, which include GM’s Chevrolet Bolt and Chevrolet Volt models. Shares of GM extended declines following the comments, falling 2.55% to $36.69 each as of market close.
Shares of Papa John’s (PZZA) slumped following a report that Trian Fund Management is no longer planning a bid for the beleaguered pizza chain, according to a Wall Street Journal story citing people familiar with the matter. The company has struggled with longstanding operational challenges and reported four consecutive quarters of falling same-store sales. It has also faced public relations battles after its founder John Schnatter resigned over the summer after it was discovered that he had used a racially charged slur during a conference call. Shares of Papa John’s fell 10.23% to $51.77 each as of market close.
Tesla (TSLA) vehicle sales fell 70% in October over last year, an unnamed official with the China Passenger Car Association told Reuters. The electric-car maker sold a total of 211 cars in China last month, the official told Reuters, which would represent a material sales slowdown in the largest auto market in the world. Last week, Tesla said it was cutting the price of its Model X and Model S vehicles in China in a move intended in part to help offset the impact of higher tariffs. A Tesla spokesperson told Yahoo Finance the report was “wildly inaccurate,” adding, “While we do not disclose regional or monthly sales numbers, these figures are off by a significant margin.” Shares of Tesla fell 0.6% to $343.92 each as of market close.
United Technologies (UTX) announced Monday that it plans to split into three companies, Otis, Carrier and United Technologies. Gregory Hayes will remain in his role as chairman and CEO of United Technologies during and following the split, which the company expects will be completed in 2020. Otis will focus on the manufacturing of elevators and escalators, Carrier will provide products related to HVAC and refrigeration and United Technologies will be a supplier for the aerospace and defense industries. Shares of United Technologies Corporation fell 4.16% to $122.66 each as of market close.
S&P Dow Jones Indices will make several changes to the constituents of the S&P 500, S&P MidCap 400 and S&P SmallCap 600 prior to the opening of trading on December 3. In the S&P 500, Maxim Integrated Products Inc. (MXIM) will replace Aetna (AET) , which is being acquired by CVS (CVS) in a deal expected to close later in November. Food processing company Lamb Weston Holdings (LW), a member of the S&P MidCap 400, will replace Rockwell Collins (COL) in the S&P 500, and Diamondback Energy (FANG) will replace Stericycle (SRCL).
ECONOMY: Consumer confidence edges lower in November
Consumer confidence fell to 135.7 from 137.9 in October, The Conference Board said in a statement Tuesday. The reading was in-line with consensus estimates among economists polled by Bloomberg.
Despite the decline, the nearness of the latest headline reading to October’s 18-year high “illustrates that consumers have not been too troubled by the recent falls in equity prices, providing another reason to expect the Fed to press ahead and raise interest rates again in December,” said Andrew Hunter, U.S. economist with Capital Economics.
The Conference Board’s index tracking consumer assessment of current business and labor market conditions improved slightly to 171.9 from 172.7, while a measure of consumers’ short-term outlook for income, business and labor market conditions fell to 111 on November from 115.1 in October.
“Despite a small decline in November, Consumer Confidence remains at historically strong levels,” Lynn Franco, Senior Director of Economic Indicators at The Conference Board, said in a statement. “Consumers’ assessment of current conditions increased slightly, with job growth the main driver of improvement. Expectations, on the other hand, weakened somewhat in November, primarily due to a less optimistic view of future business conditions and personal income prospects. Overall, consumers are still quite confident that economic growth will continue at a solid pace into early 2019. However, if expectations soften further in the coming months, the pace of growth is likely to begin moderating.”
NEWS: Cyber Monday sales hit a record $7.9 billion
Cyber Monday online sales jumped to a record $7.9 billion this year, increasing by more than 19% over last year and marking the single largest shopping day in U.S. history, according to Adobe Analytics data. This exceeded the data firm’s own expectations for sales of $7.8 billion on Cyber Monday. Sales from smartphones hit an all-time high of $2 billion. Last week, Thanksgiving Day and Black Friday shopping brought in $3.7 billion and $6.2 billion, respectively.
According to the National Retail Federation, more than 165 million Americans shopped either in stores or online between Thanksgiving Day and Cyber Monday. The number of Americans shopping both online and in stores rose 40% over last year to 89 million, the NRF survey found. The average amount spent on gifts and holiday items between Thursday and Monday was $313.29, while consumers aged 35 to 44 years old spent the most with an average of $413.05.
“What I heard in discussions with retail CEOs across all categories and segments was very positive, driven by macro conditions of low unemployment and rising wages combined with the right mix of merchandise at great prices,” Matthew Shay, NRF President and CEO, said in a statement. “This is a very strong emotional start to the holiday season and a positive indicator of where we are headed over the next month.”
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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