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US stocks fell sharply on Monday as the trade war between China and the United States entered a new phase as tariffs on billions of dollars of products came into effect. Investors also turned to the Federal Reserve's two-day monetary policy meeting, which ends on Wednesday and is expected to lead to a further rise in interest rates.
Where are the main reference markets?
The Dow Jones Industrial Average
DJIA, -0.55%
fell 177 points, or 0.7%, to 26,565 after closing to a record Friday. The S & P 500
SPX, -0.31%
12 points, or 0.4%, to 2,916. The Nasdaq Composite Index
COMP + 0.05%
11 points, or 0.4%, at 7,975.
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Sectors closely linked to the trade issue were among the largest declining – both materials and industrial products fell by more than 1%.
Inventories have been trending upward lately; The S & P 500 has risen in eight of the last ten trading days, as of Friday, and the Dow posted its biggest weekly gain since July last week.
See: A new S & P 500 sector should begin: here's what investors need to know
What drives the market?
Investors are keeping a close eye on the latest developments in trade relations between the United States and other major economies, especially China. While Wall Street has repeatedly ignored the threat of growing trade tensions, focusing instead on sound economic data and business fundamentals, there is still a fear that the situation will degenerate into a widespread trade war that may have a greater impact. serious about global demand. growth.
On Monday, the Chinese authorities fought back against the administration of President Donald Trump, accusing him of "trade harassment" and pushing the "America First" agenda at the expense of international relations. The comments came as the latest tariff swap had come into effect, namely 10% tariffs on the $ 200 billion worth of Chinese goods, to which China was giving $ 60 billion in tariffs on imports. American products.
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In addition to the commercial issue, investors will monitor the Fed, which is expected to announce a rise in interest rates at the end of its meeting Wednesday. The meeting will be followed by Fed Chairman Jerome Powell's press conference, where investors should look for the state of the economy, the impact of trade issues or any potential changes in the policy. the central bank.
The policy could also contribute to some market uncertainty, as confirmation of the appointment of Supreme Court candidate Brett Kavanaugh appears less certain than former Yavan classmate Deborah Ramirez alleging that the judge exposed to her at a party.
On the economic data front, the Chicago Fed's activity index stood at 0.18 in August, unchanged from the previous month.
What do market analysts say?
"We expect a slight decline after breaking records, and there is also a bigger question: where are we going, economically? There is concern that tariffs will bring the economy back and it is almost certain that the Fed will raise rates this week. This raises the question of how long the recovery will last and how much profit will increase from here, "said Bruce McCain, chief investment strategist at Key Private Bank.
Trade tensions are increasing because the Trump administration imposes a 10% tariff on Chinese imports for $ 200 billion, which could eventually reach 25% if the two countries fail to reach a compromise. Strategist at Fundstrat Global Advisors. But the main problem that should worry investors is that Trump does not seem to have an exit strategy during his confrontation with China, he said.
What are the targeted stocks?
Exxon Mobil Corp.
XOM, + 1.65%
increased by 1.7% and Chevron Corp.
CLC + 1.21%
was up 0.6% due to high crude oil prices.
Comcast Corp.
CMCSA, -5.98%
overcome 21st Century Fox Inc.
FOXA, + 1.44%
in a three-round auction for Sky PLC
SKYAY, + 8.69%
winning the broadcaster with a bid of $ 38.8 billion. Comcast shares fell 7.2% while US stocks listed on Sky gained 8.8%.
Sirius XM Holdings Inc.
SIRI, -8.81%
agreed to buy Pandora
P + 0.33%
in a stock market transaction valued at $ 3.5 billion. Pandora shares rose 1.1% while Sirius fell 8.6%.
Digital Realty Trust
DLR -4.17%
after agreeing to acquire Ascenty from Great Hill Partners for approximately $ 1.8 billion.
Randgold Resources Ltd.
RHA + 6.03%
and Barrick Gold Corp.
ABX, + 6.45%
has agreed to a 50/50 merger that will create a gold mining giant of $ 18.3 billion. Barrick shares listed in the United States increased 6.5%.
Where are the other commercial markets?
Hong Kong shares tumbled on Monday, as trade tensions returned earlier this week for Asia, which had been blunted by the closure of several markets for the holidays. Shares in Europe were also slightly lower.
Gold
GCM9, + 0.25%
climbed while the american dollar index
DXY, -0.03%
decreased by 0.2%. Crude oil price
CLK9, + 2.21%
rallied and Brent-futures futures
LCOK9, + 2.75%
traded near their highest level in over three years. The increase came as the major energy producers refused to pledge to increase crude oil production to cope with planned supply disruptions at a producers' meeting. closely watched.
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