By Chris Matthews and Barbara Kollmeyer, MarketWatch
U.S. officials vow higher China tariffs will kick in by Friday;
Vice Chairman Liu He expected to attend negotiations this week in
Washington
U.S. stocks extended their slide midday Tuesday, following the
previous session's losses after U.S. officials confirmed that
tariffs on imported goods from China could be raised by the end of
the week.
How are benchmark indexes faring?
The Dow Jones Industrial Average fell 439 points, or 1.7%, to
25,993, while the S&P 500 index dropped 50 points, or 1.7%, to
2,884. The Nasdaq Composite Index fell 146 points, or 1.8%, to
7,977.
U.S. stocks finished lower on Monday
(http://www.marketwatch.com/story/us-stock-futures-sink-as-threat-of-full-blown-trade-war-re-emerges-2019-05-06),
but pared deep losses. The Dow slid 66.47 points, or 0.3%, to
26,438.48 after being down more than 470 points earlier in the
session. The S&P 500 index declined 0.5% to 2,932.47, while the
Nasdaq retreated 0.5%, to 8,123.29 after touching a Monday low near
the open at 7,981.85.
What's driving markets?
U.S. Trade Representative Robert Lighthizer said Monday that the
Trump administration will increase tariffs
(http://www.marketwatch.com/story/lighthizer-accuses-china-of-reneging-on-promises-says-tariffs-will-rise-friday-2019-05-06)
on $200 billion in Chinese goods early Friday. The prospect of
higher tariffs had been first raised on Sunday by President Donald
Trump, rattling investors who had anticipated that better progress
toward a near-term resolution between the two superpowers.
Read:With Trump threatening to tighten the trade screws, here's
a look at what tariffs have done so far
(http://www.marketwatch.com/story/with-trump-threatening-to-tighten-the-trade-screws-heres-a-look-at-what-tariffs-have-done-so-far-2019-05-06)
In a briefing, Treasury Secretary Steven Mnuchin, along with
Lighthizer, told reporters that the U.S. administration was made
aware over the weekend that China was trying to back away from
"some of the language" that had been hammered out in prior
talks.
U.S. officials said that tariffs on those Chinese goods will
rise from 10% to 20% at 12:01 a.m. Eastern time Friday, and markets
will likely be monitoring China for further reaction.
The Wall Street Journal reported early Tuesday
(https://www.wsj.com/articles/china-says-vice-premier-liu-he-to-visit-u-s-thursday-friday-11557211757?mod=searchresults&page=1&pos=2)that
China's Commerce Ministry said on Tuesday that Vice Premier Liu He
will visit Washington to continue trade talks on Thursday and
Friday.
Chinese investors appeared to take the latest developments in
stride, while buyers in so-called haven securities nudged the value
of assets perceived as safe slightly higher.
What stocks are in focus?
Shares of Anadarko Petroleum Corp.(APC) could be in focus
Tuesday, after the company said Monday evening that a $38 million
bid by Occidental Petroleum Corp. (OXY) was superior to a
previously accepted by Chevron Corp. (CVX) Stifel Nicolaus,
downgraded Anadarko to hold from buy, while raising its price
target to $7 from $68.
Shares of Allergan PLC. (AGN) fell 4.4%, even after the
pharmaceutical company reported first-quarter earnings
(http://www.marketwatch.com/story/allergan-stock-down-05-despite-earnings-and-revenue-beat-2019-05-07)
that surpassed Wall Street expectations.
Mylan NV(MYL) shares fell more than 16% Tuesday, after the
drugmaker reported a revenue shortfall
(http://www.marketwatch.com/story/mylan-shares-down-45-after-drugmaker-misses-on-revenue-2019-05-07)
that offset a profit beat.
Shares of American International Group Inc. (AIG) rose 7.8%
Tuesday, after the company reported better-than-expected adjusted
earnings on Monday evening.
Aramark(ARMK) stock tumbled 8.5% Tuesday, after the
facilities-management company reported first-quarter profit and
sales
(http://www.marketwatch.com/story/aramark-misses-earnings-expectations-2019-05-07)
that fell short of analyst expectations.
Shares of Tesla Inc. (TSLA) are in focus after the company
announced late Monday that Chief Executive Elon Musk spent $25
million to buy more shares in the electric car maker, to increase
his stake in the company to nearly 20%.
Crocs Inc. (CROX) stock rose 1.4% Tuesday, after the footwear
manufacturer reported first-quarter earnings and revenue that beat
expectations.
Shares of GW Pharmaceuticals PLC(GWPH) rallied 2.8%, after the
company reported positive phase-three trial results and narrowing
losses on Wednesday evening
(http://www.marketwatch.com/story/gw-pharmaceuticals-stock-rises-after-earnings-2019-05-06).
Shares rose further after Oppenheimer upgraded the stock
(http://www.marketwatch.com/story/gw-pharma-shares-soar-9-premarket-as-oppenheimer-upgrades-to-outperform-2019-05-07)
to outperform, while JPMorgan and Stifel Nicolaus also raised their
price targets on the stock.
What are analysts saying?
"Investors are going the hypothetical route and projecting out a
worse case scenario on trade," Craig Callahan, president of Icon
Investments, said in an interview. "I think it's too early to get
so pessimistic, but a lot of investors are."
"The likelihood the Fed cuts rates if the trade talks collapse
is probably the reason the market will hang in better than it
should given that the Chinese just upped the ante this morning,"
Ian Winer, advisory board member of Drexel Hamilton, told
MarketWatch.
"If the talks fall through, it will cast the markets back into
the big unknown and the recent joy-fest will come to a halt. If the
Fed turns even more dovish -- and we all know the president and
advisers are hounding them to move this direction -- then that
liquidity should keep things from unwinding too fast," he
added.
"The overriding concern here is that Trump has single-handedly
halted the recent recovery in risk appetite by potentially
derailing trade talks," said Jasper Lawler, head of research at
London Capital Group, in a note to traders.
Lawler said traders were "placated" by news that Chinese
delegates would still arrive in Washington this week for talks, but
skeptical the two sides can work out the latest fracture by the
Friday deadline. "This means markets probably need to see the
Friday deadline for raising U.S. tariffs on Chinese goods pushed
back to avoid another selloff," he said.
What's on the economic calendar?
The number of job openings in the U.S. rose to 7.5 million on
the last business day of March, according to the Labor Department.
The rate at which Americans were being hired for new jobs or
leaving old jobs was unchanged at 2.3%.
Dallas Fed President Robert Kaplan told the Hoover Institution
Monetary Policy Conference
(https://www.dallasfed.org/research/economics/2019/0507) that he
expects wage growth and inflation to accelerate in 2019.
Federal Reserve Vice Chairman Richard Clarida said in an
interview with Bloomberg News that, "We don't see a strong case
(http://www.marketwatch.com/story/feds-clarida-pushes-back-on-trump-pence-call-for-rate-cuts-because-of-low-inflation-2019-05-07)
to move rates in either direction," while adding that he believes
the Fed's current policy path will return the U.S. economy to 2%
inflation.
Randal Quarles, vice chairman of the Federal Reserve Board of
Governors participated in a panel discussion on financial
regulation Tuesday morning.
How are other markets trading?
In Asia
(http://www.marketwatch.com/story/asian-markets-mixed-as-traders-weigh-us-china-trade-dispute-2019-05-06),
the Shanghai Composite Index reversed a small loss to close up
0.6%, while the Nikkei 225 , back from an extended holiday break,
fell 1.5%. European stocks were mostly lower
(http://www.marketwatch.com/story/europe-markets-sinking-again-on-trade-war-escalation-2019-05-07),
with the FTSE 100 index down 1.6% as investors returned from a
holiday and played catch up to Monday's losses on the
continent.
Gold was down slightly
(http://www.marketwatch.com/story/gold-lower-finds-little-traction-despite-trade-induced-stock-retreat-2019-05-07),
while the U.S. Dollar Index edged higher
(http://www.marketwatch.com/story/turkish-lira-tumbles-to-7-month-low-amid-further-political-unrest-2019-05-07),
and crude oil
(http://www.marketwatch.com/story/oil-prices-retreat-as-us-china-trade-spat-sparks-demand-concerns-2019-05-07)
dropped.
(END) Dow Jones Newswires
May 07, 2019 12:07 ET (16:07 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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