Wall Street closed in negative territory as the trade conflict between the United States and China worsened. Moreover, President Trump has threatened to stall his infrastructure legislation if Democrats continue to investigate him. All three major indexes ended in the red.
The Dow Jones Industrial Average (DJI) lost 0.4% or 100.72 points to close at 25,776.61. The S&P 500 decreased 0.3% to close at 2,856.27. Meanwhile, the Nasdaq Composite Index closed at 7,750.84, declining 0.5%. The fear-gauge CBOE Volatility Index (VIX) decreased 1.3% to close at 14.75. A total of 6 billion shares were traded on Wednesday, lower than the last 20-session average of 6.94 billion. Decliners outnumbered advancers on the NYSE by a 1.71-to-1 ratio. On Nasdaq, a 1.94-to-1 ratio favored declining issues.
How Did The Benchmarks Perform?
The Dow closed in negative territory with 18 components of the 30-stock blue-chip index closing in the red while twelve finished in the red. The S&P 500 also closed in the red.The Energy Select Sector SPDR (XLE) and Consumer Discretionary Select Sector SPDR (XLY) tumbled 1.6% and 1%, respectively. Notably, seven out of eleven sectors of the benchmark index closed in the red while four finished in the green. Moreover, tech-heavy Nasdaq Composite ended in negative territory due to weak performance by trade-sensitive large-cap stocks.
Trade Conflict Worsens
On May 22, U.S. Treasury Secretary Steven Mnuchin said the schedule for the next round of trade negotiations with China remains undecided. To make the situation worse, The South China Morning Post reported that China is considering reducing purchase of natural gas from the United States.
Notably, on May 17 CNBC reported that U.S.-China trade negotiations appear to have stalled. On May18, South China Morning Post reported that Beijing in no rush for US Treasury Secretary Steven Mnuchin to visit China.
On May 10, the U.S. government hiked existing tariff rates to 25% from 10% on $200 billion of Chinese exports. In 2018, the Trump administration imposed 25% tariff on $50 billion of Chinese goods. Moreover, President Trump threatened to levy 25% tariff on another $325 billion of Chinese goods. China had imposed $110 billion tariffs on U.S. exports in 2018. Following the hike of U.S. tariff, China 25% tariff on an additional $60 billion U.S. goods effective Jun 1, 2019.
Trump Threatens to Stall Infrastructure Bill
On May 22, President Trump said that he would not push his infrastructure legislation if Democrats continue to investigate him through several committees. Trump further said that he wants the infrastructure bill to be implemented. However, Trump also said “we can’t do it under these circumstances” while walking out of a meeting with House Speaker Nancy Pelosi and Senate Minority Leader Chuck Schumer at the White House.
Consequently, shares of infrastructure developers like Simpson Manufacturing Co. Inc. SSD, Nucor Corp. NUE and Martin Marietta Materials Inc. MLM tanked 1.5%, 1.5% and 2.2%, respectively. Martin Marietta Materials carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The U.S. Energy Information Administration (EIA) reported that U.S. crude oil inventories rose by 4.7 million barrels to 476.8 million barrels for the week ended May 17. Following the news, the U.S. benchmark West Texas Intermediate (WTI) crude future prices slipped $0.31 or 0.5% to $61.11 per barrel. Likewise, the global benchmark Brent crude future prices were down $0.37 or 0.5% to $70.62 per barrel.
Fed's FOMC minutes of the meeting Apr 30-May 1 stated that all its members unanimously agreed to maintain current accommodative stance. The Fed will not increase rate anytime near future given the low inflation rate. The central bank also stated that it was more comfortable now with the current global economic condition.
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