By Sue Chang and Chris Matthews, MarketWatch

Dow attempts to avert longest losing skid in 2 months

The U.S. stock market on Wednesday traded moderately higher even as worries over U.S.-China trade talks lingered, a day after mounting tensions between the two economic giants triggered the Dow Jones Industrial Average's biggest daily decline in about four months.

How are the benchmark indexes faring?

The Dow Jones Industrial Average rose 79 points, or 0.3%, to 26,043, the S&P 500 gained 5 points, or 0.2%, to 2,889, while the Nasdaq Composite Index advanced 8 points, or 0.1%, to 7,972.

On Tuesday (http://www.marketwatch.com/story/us-stock-futures-lower-as-trade-tensions-stay-in-the-spotlight-2019-05-07), the Dow tumbled 1.8% to 25,965.09, suffering its largest percentage decline since Jan. 3, while the S&P 500 index dropped 1.7%, to 2,884.05. The Nasdaq fell 2%, to 7,963.76. The S&P 500 and Nasdaq saw their biggest daily declines since March 22, according to FactSet data.

Read:The stock market is on pace for its worst month since December rout (http://www.marketwatch.com/story/the-stock-market-is-on-pace-for-its-worst-month-since-december-routas-volatility-returns-with-a-vengeance-2019-05-07)

What's driving markets?

Strong gains in health-care and real-estate sectors have offset pressure from China-U.S. tariff tensions, which have buffeted assets perceived as risky. The belligerent tone from the White House caught many investors by surprise after having anticipated a tidy pact to the protracted talks coming to fruition soon.

See:How U.S.-China trade uncertainty could trigger a stock-market buy signal (http://www.marketwatch.com/story/how-us-china-trade-uncertainty-could-trigger-a-stock-market-buy-signal-2019-05-08)

On Wednesday, a notice in the Federal Register formally laid the groundwork to raise tariffs on $200 billion of Chinese imports to 25% from 10% early Friday, following through on remarks by U.S. Trade Representative Robert Lighthizer regarding such a move on Monday. The prospect of higher tariffs was first raised on Sunday by President Donald Trump, rattling investors who had anticipated better progress toward a near-term resolution.

Read:'China has chosen to retreat' -- the U.S. view as negotiations reach critical juncture (http://www.marketwatch.com/story/china-has-chosen-to-retreat-the-us-view-as-negotiations-reach-critical-juncture-2019-05-08)

Trump once again weighed in on the negotiations via Twitter Wednesday, saying that the Chinese are now "coming to the U.S. to make a deal," implying they had previously been slow-walking the negotiations in the hope that Trump would be voted out of office in 2020.

(https://twitter.com/realDonaldTrump/status/1126106540015071232)

(https://twitter.com/realDonaldTrump/status/1126106541004873730)

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)

Indeed, Beijing has said top trade envoys, including Vice Premier Liu He, will head to Washington on Thursday to resume negotiations.

China's diplomatic contingent had attempted to revamp a nearly 150-page draft trade agreement last Friday, as they were reluctant to agree to signing new trade terms into law, raising the ire of U.S. negotiators, according to Reuters (https://www.reuters.com/article/us-usa-trade-china-backtracking-exclusiv/exclusive-china-backtracked-on-nearly-all-aspects-of-us-trade-deal-sources-idUSKCN1SE0WJ).

Adding to policy uncertainty, Iran said it may cease compliance (http://www.marketwatch.com/story/iran-says-it-wont-comply-with-backs-out-of-some-2019-05-08) with portions of a 2015 nuclear deal it signed with the U.S., Britain, France, Germany, China and Russia. Iranian President Hassan Rouhani said that it would begin stockpiling heavy water and low-enriched uranium unless non-U.S. signatories take steps to shield the Iranian economy from Trump administration sanctions that have been crippling its economy.

What are strategists saying?

"Some consolidation was to be expected, given the phenomenal start of the year," for markets, said Eric Wiegand, senior portfolio manager at U.S. Bank, adding that the recent U.S.-China trade drama provides an opportunity for taking profits.

He also warned investors the trade dispute is "a phenomenon where you can't get an edge, because you're just one tweet away from having your previous posture undermined."

"Traders are in no mood to take a stand right now as the uncertainties regarding China and Iran take center stage," wrote Bespoke Investment Group's Paul Hickey in a note.

"The flight to safety has provided a big boost for Treasurys, re-flattening the yield curve closer to the inversion zone," he added. "And to think, just three trading days ago, the S&P 500 was flirting with a record high close!"

Which stocks are in focus?

Lyft Inc. shares slid 7.4% after the ride-hailing company late Tuesday reported quarterly earnings for the first time since its initial public offering in March. The company reported first-quarter losses that were wider than expected, but revenue that topped expectations.

Opinion: Lyft stops providing key data after IPO, then insults investors' intelligence (http://www.marketwatch.com/story/lyft-stops-providing-key-data-after-ipo-then-insults-investors-intelligence-2019-05-07)

Shares of Coty Inc. (COTY) tumbled 4.3% after the company reported a narrower loss for the fiscal third quarter, ended March 31, than the previous three months, but revenue that fell 10.4%, below consensus expectations.

McKesson Corp. (MCK) stock rose 4.7% after the supply-chain management company reported first-quarter earnings above expectations.

Shares of Wendy's Co. (WEN) gained 3.5% after the fast-food chain reported first-quarter profits and sales that surpassed Wall Street forecasts.

Nautilus Inc. (NLS) stock fell 1.7% after the exercise equipment maker reported a first-quarter loss of 29 cents a share, versus analysts expectations of just 3 cents a share, according to FactSet.

TripAdvisor Inc. (TRIP) shares sank 12% after the company posted first-quarter earnings that beat analyst expectations, but revenue that widely missed forecasts.

Qorvo Inc. (QRVO) shares rallied 5.4% after the radio-frequency component maker announced first-quarter sales and profits that beat Wall Street expectations.

Shares of Chesapeake Energy Corp. (CHK) rose 3.1%, reversing premarket losses, after the oil and natural gas company reported a wider first-quarter loss (http://www.marketwatch.com/story/chesapeake-energys-stock-bounces-into-the-green-as-investors-digest-q1-results-2019-05-08) and revenue that fell short of expectations. On the positive side, the company beat forecasts for earnings before interest, taxes, depreciation and amortization (Ebitda), as production and prices were above projections.

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 fell 1.1%, while the Nikkei 225 , in its second day from an extended holiday break, declined by a sharper 1.5%, following a similar drop on Tuesday. European stocks were mostly higher (http://www.marketwatch.com/story/europe-markets-higher-as-investors-shake-off-trade-fears-2019-05-08)., with the FTSE 100 index down 0.1%.

Gold settled lower (http://www.marketwatch.com/story/gold-at-one-week-high-as-stock-losses-look-to-persist-2019-05-08), while the U.S. Dollar Index was mostly flat (http://www.marketwatch.com/story/new-zealand-dollar-falls-after-central-bank-cuts-rate-us-dollar-slips-2019-05-08) and crude oil rose (http://www.marketwatch.com/story/us-crude-oil-climbs-up-from-roughly-one-month-low-as-iran-trade-deal-tensions-tug-at-market-2019-05-08).

--Mark DeCambre contributed to this report

 

(END) Dow Jones Newswires

May 08, 2019 14:45 ET (18:45 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.
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