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Stocks mixed as trade, geopolitical concerns pull focus

U.S. stocks were mixed amid conflicting economic data, weak guidance from some major corporations and escalating geopolitical concerns.

The S&P 500 (^GSPC) fell 0.05%, or 1.52 points, as of market close. The Dow (^DJI) fell 0.28%, or 72.82 points, while the Nasdaq (^IXIC) rose 0.07%, or 5.21 points.

Broad weakness among global equities was spurred by escalating tensions between two nuclear-armed powers in southeast Asia, adding to a growing list of geopolitical concerns for investors to monitor. India and Pakistan both claimed to have shot down one another’s fighter jets, a day after Indian fighter jets had entered into a Pakistani-controlled area in Kashmir to launch an airstrike on what it claimed was a militant training base. Tensions have mounted between the two countries this month after a terrorist group based in Pakistan carried out a suicide bombing in Kashmir in Feb. 14, killing 40 members of India’s paramilitaries.

Wednesday also marks the date of the second summit between President Donald Trump and North Korea’s Kim Jong Un, with the two leaders meeting in Hanoi, Vietnam. Trump last met with Kim in Singapore in summer 2018, which resulted in a joint statement in which the DPRK said it was committed “to work toward complete denuclearization of the Korean Peninsula.” While little progress toward this goal has since been apparent, Trump in a Twitter post Tuesday lauded the “awesome” potential of North Korea if it were to denuclearize.

Shares of global consumer goods companies dropped after Beiersdorf AG, the maker of Nivia hand-cream, announced a multi-year investment program starting in 2019 “to boost the opening of new markets, innovations, digitalization and up-skilling of workforce,” which will result in increased spending and a decline in operating margin. The announcement positions Beiersdorf amid a confluence of legacy consumer companies, including Kraft Heinz (KHC), Coca-Cola (KO), PepsiCo (PEP) and Colgate-Palmolive Co. (CL), which have recently delivered disappointing guidance as they scramble to realign with changing consumer preferences. Shares of peer consumer brand Unilever N.V. (UN) declined, tracking a nearly 10% decline in Beiersdorf by market close.

Other companies, however, delivered more upbeat news. Best Buy (BBY) reported strong fourth-quarter results, with adjusted earnings per share of $2.72 and sales of $14.8 billion both ahead of consensus estimates, and provided a first quarter adjusted EPS guidance range of 83 cents to 88 cents, ahead of the 82-cent median estimate. Best Buy’s better-than-expected results were driven by sales of wearables, appliances, smart home devices and gaming. Shares of Lowe’s (LOW) also rose after reporting quarterly results, as the company topped earnings expectations and said its U.S. comparable sales increased 5.8% in January, after a slightly lower-than-expected 1.7% comparable sales uptick in the full fourth quarter.

Elsewhere, a series of congressional hearings will pull focus on Wednesday. Federal Reserve Chairman Jerome Powell delivers his second of two days of testimony before Congress, speaking on Wednesday before the House Financial Services Committee beginning at 10 a.m. Powell’s appearance before the Senate Banking Committee Tuesday did little to stir markets and served primarily to recapitulate the central bank’s previously conveyed sentiments to remain “patient” with future decisions amid “muted” inflation risks and some growing global economic concerns.

Testimony from U.S. Trade Representative Robert Lighthizer before the House Ways and Means Committee on U.S-China trade added to a packed line-up of major congressional hearings Wednesday. Lighthizer asserted that China would need to do more than make promise to purchase more U.S. goods in order for a deal to be achieved.

“This administration is pressing for significant structural changes that would allow for a more level playing field – especially when it comes to issues of intellectual property rights and technology transfers,” Lighthizer said in prepared remarks. “The issues on the table are too serious to be resolved with promises of additional purchases. We need new rules.”

Lighthizer’s remarks come following a series of discussions between U.S. and Chinese delegations as they work to hammer out a trade deal. Trump earlier this week announced he would delay a planned tariff increase that would have begun if a deal had not been reached by March 1.

Wednesday also saw Michael Cohen, Trump’s former personal lawyer, testify before members of the House Oversight Committee, after having pleaded guilty to lying to Congress about the Russia investigation.

Chris Beauchamp, chief market analyst at IG Group, wrote in an email to Yahoo Finance that while the testimony added to the laundry list of events that “provided an excuse for some general selling” in equity markets Wednesday, its impact on trading was limited.

ECONOMY: U.S. goods trade deficit widened in December

The U.S. goods trade deficit widened 12.8% to $79.5 billion in December, the Commerce Department said Wednesday, as exports declined 2.8% and imports increased 2.4%. Consensus economists expected the goods trade gap to widen to $73.6 billion. In November, the trade deficit was $70.5 billion.

Advanced wholesale inventories were up 1.1% in December, above consensus expectations of 0.4%, according to Bloomberg data. Retail inventories rose 0.9% month-over-month in December, above the 0.2% consensus expectations and a 0.4% decline in November. Non-automobile retail inventories, a key input from the retail data to calculate gross domestic product, rose 1% month-over-month, following a decline of 0.9% in November.

Fourth-quarter GDP results will be released Thursday.

“Two stories are at work in the trade numbers. First, the combination of relatively strong domestic demand, boosted by tax cuts and lower gas prices, coupled with softening global demand, is a toxic combination,” Ian Shepherdson, chief economist for Pantheon Macroeconomics, wrote in an email Wednesday. “Second, the threat of increased tariffs on imports from China appears to have prompted precautionary inventory-building. This won’t continue indefinitely, and some of it should reverse when a trade deal with China is signed. For now, though, the rate of increase of the deficit looks alarming, and it means that foreign trade was a drag on Q4 GDP growth.”

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck

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