Before the bell: the trade war is now the main risk for the markets

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The resumption of the trade war between the United States and China surprised investors and affected global stocks. The S & P 500 sold 2.2% and the Dow Jones fell 2.1% for the week after President Donald Trump fulfilled his commitment to raise tariffs on Chinese products to a value of 200 billions of dollars. China said it will take revenge, even if both sides are still engaged in negotiations.

"The big problem for the market at the moment is clearly the business problem," said Ed Yardeni, chairman of investment advisory firm Yardeni Research.

Last December (the last time volatility was the subject of much debate), the market was panicked by the slowdown in economic growth, a hawkish federal reserve and the discomfort felt by US-China relations.

Markets recovered as these factors appeared to be taken into account. Jerome Powell's Federal Reserve has adopted a wait-and-see approach and said it would keep interest rates at a stable level. The global economic situation seemed healthier. And the Trump administration has said it is considering a trade deal with China.

"There is no doubt that what the Fed has done until backtracking has boosted the stock market this year," said Peter Boockvar, chief investment officer of the Bleakley Advisory Group.

Then came higher rates.

"The markets were waiting for an agreement," said Adam Slater, senior economist at Oxford Economics. "I guess they may have been too optimistic on many fronts."

According to Yardeni, a correction of 10% or 15% is a real possibility if the trade war continues to intensify. Detrick said US markets could fall 5% next month.

The risk is heightened by the fact that the United States is waging a trade war on several fronts. Trump's threat of imposing 20% ​​tariffs on cars coming from Europe could also soon reach its peak, Yardeni noted.

For now, at least, investors will remain focused on discussions with China. The consensus is that for the market to continue running, a resolution is needed soon.

"You just do not want to see the world's two biggest economies in disorder for a long time," said Boockvar.

2. Walmart Earnings: Walmart (WMT) will release its results on Thursday, and investors will want to know if the company can control the huge costs of the fight Amazon (AMZN).
In the last quarter, Walmart increased its digital business by approximately 40%, thanks to its efforts to improve its own website, Jet.com, as well as its online store offerings. But it turned out to be a costly venture, resulting in tight profits.
Too bad for profits: Walmart has granted its employees a 50% increase over the last three years, including benefits and bonuses. That's the price that Walmart had to pay to keep its employees during the lowest unemployment rate in the United States for five decades.

3. economical watch: The Census Bureau will release retail sales in the United States for April on Wednesday.

The retail sector is becoming a story of the haves and the have-nots. While Walmart, Amazon, Macy & # 39; s (M), Best buy (BBY) and Kohl (KSS) have adapted well to the rapidly changing demands of consumers, others like JCPenney (JCP), Sears (SHLDQ) not have.

However, people still buy things – they simply buy in different ways and in different places. Economists surveyed by Refinitiv expect retail sales to rise 0.2% last month.

The University of Michigan will release Friday its report on US consumer confidence in May. These reports tend to reflect the way consumers assimilate news.

For example, when the US government closed in the winter, the feeling collapsed. However, following reports of a stronger-than-expected economy and a historically low unemployment rate, economists surveyed by Refinitiv expect a slight rise in sentiment from last month.

4. Coming next week:

On Monday – Tencent Music (TME) earnings
Tuesday – Nissan (NSANF) earnings
Wednesday – Ali Baba (Baba), Tencent (TCEHY) and Macy & # 39; s (M) earnings; US retail sales in April
Thursday – Walmart (WMT), Baidu (BIDU) and NVIDIA (NVDA) earnings; The VivaTech conference begins in Paris
Friday – American consumer sentiment

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