U.S. stocks attempted to trade higher Tuesday, a day after the Dow and the technology-laden Nasdaq suffered triple-digit losses, amid gyrations in the oil market, a stronger dollar and nagging concerns about trade negotiations and sluggish international growth.
How did the benchmarks fare?
The Dow Jones Industrial Average DJIA, -0.40% fell 20 points, or less than 0.1%, at 25,368, the S&P 500 SPX, +0.16% was climbing 8 points, or 0.3%, at 2,733, while The Nasdaq Composite Index COMP, +0.55% have advanced 20 points, or 0.3%, at 7,220.
On Monday, the Dow tumbled 602.12 points, or 2.3%, to 25,387.18, the S&P 500 fell 54.79 points, or 2%, to 2,726.22, while the Nasdaq Composite Index got hammered, shedding 206.03 points, or 2.8%, to 7,200.87.
What drove the market?
Some apparent moderation in trade tensions between the U.S. and China may be behind Tuesday’s early optimism. According to The Wall Street Journal, Treasury Secretary Steven Mnuchin spoke with Chinese Vice Premier Liu He on Friday about a possible resolution of a the protracted trade spat between Beijing and Washington. The talk between the officials comes ahead of a scheduled meeting between President Donald Trump and President Xi Jinping, set for the end of the month at the G-20 summit in Buenos Aires.
On Monday, reports indicated that Trump was focusing on imposing tariffs on automobile imports and internally circulating a draft report from the Commerce Department on auto tariffs, according to a Bloomberg report. That is a move that could further escalate the animus between the U.S. and the rest of the world on trade.
In other tensions, Trump’s tweet on Monday afternoon may have also helped to exacerbate a selloff in crude-oil prices, which suffered an 11 straight decline, marking its longest skid on record. Trump voiced disapproval over a potential production cut by Saudi Arabia and OPEC, and said prices “should be much lower based on supply!”
Oil has become a focal point for investors, with some bears suggesting that stumbles in crude-oil prices CLZ8, -4.91% into bear-market territory—a decline of at least 20% from a recent peak—are a telltale sign of sluggish global economic expansion.
What are strategists saying?
“Tailwinds that powered the market earlier this year, like synchronized global growth and loose monetary policy, have officially turned into headwinds,” Eric Wiegand, senior portfolio manager at U.S. Bank, told MarketWatch.
“The real struggle for equity prices now are the highly visible potential for policy errors,” Weigand said, arguing that investors are rightly concerned that the Trump administration will fail to achieve a rapprochement with China on trade issues, and that the Fed will raise rates too aggressively, even as inflation pressures appear to be easing.
Reports that Treasury Secretary Steven Mnuchin spoke with Chinese Vice Premier Liu last Friday about trade issues, helped to buoy stock prices this morning, Wiegand said. “But investors are becoming more unresponsive to headlines” that suggest a potential easing of trade sessions, but which lack information about concrete steps to reduce trade barriers.
“Stock markets are higher this morning as sentiment is slightly more optimistic despite the political risks,” wrote David Madden, market analyst at CMC Markets UK.
“Apple will be in focus again today after losing over 5% last night. The tech giant has been under pressure since the group released its latest quarterly figures, and the number of iPhone sales missed forecasts. The company will no longer report unit sales of iPhones and iPads which could be a sign that we are at peak iPhone,” he said.
Which stocks were in focus?
Shares of Home Depot Inc. HD, -3.19% were 1.3% higher after the home-improvement giant released quarterly results that were better than expected and raised its guidance.
Apple’s stock AAPL, +0.32% remain under pressure after the iPhone maker skidded 5% following Lumentum Holdings Inc.’s LITE, +6.93% cut of its earnings and revenue outlook, saying it received a request from “one of its largest industrial and consumer customers for laser diodes for 3D sensing” to “materially reduce shipments” which is believed to be Apple.
Apple’s skid helped to fuel a broader selloff in the tech market and the semiconductor sector, with a popular fund for the group, the iShares PHLX Semiconductor ETF SOXX, +1.73% finishing down 4.5% on Monday.
Goldman Sachs Group Inc. GS, -0.10% are advancing 2.5% at the start of trade Tuesday, after shares of the investment bank skidded 7.5% on Monday, representing its worst day in about seven years.
Boeing Co. BA, -3.62% stock is in focus Tuesday, after The Wall Street Journal reported that the aircraft manufacturer withheld information from airline managers and pilots regarding a new stall-prevention system added to two of its airplane models. The new feature may have been a factor in last month’s Lion Air jet crash. The stock is down 2.7% Tuesday.
Shares of Tyson Foods Inc. TSN, -6.20% are down 6.3% Monday morning, after the processed-foods company reported fiscal fourth-quarter revenue below Wall Street expectations, and issued weak guidance.
HollyFrontier Corp. HFC, -3.20% stock is down 0.5% after the company announced Tuesday morning that it will acquire the privately held Sonneborn US Holdings Inc. and Sonneborn Coӧperatief U.A for cash consideration of $655 million, including working capital with an estimated value of $72 million.
Shares of Advance Auto Parts, Inc. AAP, +9.47% are surging more than 9% Tuesday morning, after the firm beat third-quarter estimates and raised its full-year 2018 guidance.
Johnson Controls International PLC JCI, +2.98% shares are up 3.1% after the commercial services firm announced that it will sell its Power Solutions business to Brookfield Business Partners for $13.2 billion in cash.
Vodaphone Group PLC VOD, +9.06% shares are advancing 7.8%, following an earnings call in which new CEO Nick Reed assured investors that the company wouldn’t cut its dividend, and could even increase payouts to shareholders as it works to cut costs and leverage.
Amazon.com Inc. AMZN, +0.53% meanwhile, will likely see active trade after the e-commerce giant selected Northern Virginia and New York City for its second and third corporate headquarters.
What data and Fed speakers are ahead
The National Federation of Independent Business small-business optimism index declined 0.5 point to a seasonally adjusted 107.4 in October, a four-month low.
A report on the federal budget is due at 2 p.m. Eastern Time.
On the Fed front, Federal Reserve Board Gov. Lael Brainard was set to deliver a speech at 10 a.m., president of the Minneapolis Federal Reserve Neel Kashkari was due participate in a Q&A at the same hour. Philadelphia Fed President Patrick Harker was on track to deliver a speech at 2:20 p.m., while new member, San Francisco Fed President Mary Daly is set to speak at 5 p.m.
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