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Stocks slide as investors consider potential U.S.-China trade deal

U.S. stocks declined, reversing gains made earlier in the day on the heels of reports of an impending trade deal between the U.S. and China.

The S&P 500 (^GSPC) fell 0.39%, or 10.88 points, as of market close, with the Healthcare sector leading declines. The Dow (^DJI) declined the most since February 7, falling 0.79%, or 204.91 points. However, the index pared some losses after shedding more than 400 points earlier in the session. The Nasdaq (^IXIC) slipped 0.23%, or 17.79 points.

Monday’s drop in the major U.S. equity indices comes following the Dow’s first weekly decline in 2019. However, equity performance has so far been strong for the year-to-date, with the S&P 500 posting an 11.5% gain between January and February, or the best two-month start to the year since 1991.

The U.S. and China are reportedly nearing a trade deal that would involve Beijing lowering tariffs on American farm, chemical, auto and other products and bumping up purchases of American goods. As part of the deal, the U.S. would lift many or all tariffs on Chinese products. Such an agreement could come as soon as the end of March, according to reports citing unnamed individuals familiar with the matter.

“The carrot of a trade deal is being dangled in front of investors once again,” Chris Beauchamp, chief market analyst at IG Group, wrote in an email. “Hope that Trump and Xi will sit down later in the month to hammer out a resolution have buoyed equities, but given the outcome of last week’s U.S.-NK chit-chat perhaps a more sanguine approach would make sense.”

Last week, President Donald Trump walked out during his second summit with North Korean leader Kim Jong Un after the two failed to come to an agreement that would satisfy Washington’s demands for North Korea to give up most of its nuclear weapons program.

China also intends to cut the value-added tax rate covering its manufacturing sector by 3 percentage points, according to a Bloomberg report citing a person familiar with the matter. The VAT reduction, which may be announced as soon as this week, could provide a boost to the decelerating Chinese economy of 600 billion yuan ($90 billion), or 0.6% of GDP, according to Morgan Stanley estimates.

STOCKS

Tesla (TSLA) will unveil its Model Y vehicle on March 14 at LA Design Studio, CEO Elon Musk said in a series of Twitter posts on Monday. Musk has been hinting at the release of the SUV electric vehicle since 2015, and said in a letter to shareholders in January that high-volume production of the Model Y would begin by the end of 2020. The Model Y reveal comes shortly after the electric car-maker’s decision to shift worldwide sales online and close stores to lower its vehicle prices.

Children’s Place (PLCE) reported fiscal fourth-quarter results that fell short of consensus expectations as the liquidation of children’s apparel competitor Gymboree “created unprecedented near-term visibility challenges.” Children’s Place announced it will spend $76 million to acquire the rights to Gymboree and Crazy 8 brands following Gymboree’s January filing for Chapter 11 bankruptcy protection. Fourth-quarter comparable sales for Children’s Place declined 0.6%, and net sales of $530.6 million were well below consensus estimates of $553.2 million. In the first quarter, the company sees comparable sales of between negative 10% to negative 12%. For fiscal 2019, the company sees net sales in the range of $1.89 billion to $1.92 billion.

Newmont Mining (NEM) rejected Barrick Gold’s (GOLD) $17.8 billion hostile bid, saying that the transaction is not in the best interest of shareholders. Newmont wrote in a statement Monday that its previously announced combination with Goldcorp “represents a superior value creation opportunity to generate long-term value through an unmatched portfolio of world class operations, projects, exploration opportunities, reserves and talent.” Barrick had launched a hostile bid for Newmont last week in an all-stock offer with a purchase price representing an about 8% discount to each Newmont share. Barrick had touted the potential cost savings through a joint venture in Nevada, where both have major gold reserves.

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

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