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U.S. stocks fell sharply at the start of trade Tuesday, on track for a second day of heavy losses, after President Donald Trump said the idea of holding off on a U.S.-China trade deal until after the 2020 presidential election had appeal, undermining market confidence that a deal may be done before fresh import tariffs are imposed on December 15.
Investors were also monitoring moves by President Trump to raise or threaten tariffs on other partners, including Brazil, Argentina and France.
What are major indexes doing?
The Dow Jones Industrial Average
DJIA, -1.47%
fell 326 points, or 1.2%, to trade at 27,450, while the S&P 500 index
SPX, -1.13%
gave up 33 points, or 1.1%, to trade at 3,080. The Nasdaq Composite index
COMP, -1.13%
retreated 113 points, or 1.3%, at 8,456.
Stocks saw their biggest one-day decline in nearly eight weeks on Monday, with the Dow falling 268.37 points, or 1%, to end at 27,783.04. The S&P 500 dropped 27.11 points or 0.9%, to close at 3,113.87, while the Nasdaq Composite finished at 8,567.99, with a loss of 97.48 points or 1.1%.
What’s driving the market?
Stocks fell after Trump, speaking at a London news conference where he is attending a NATO meeting, said he had “no deadline” when it comes to concluding the long-running U.S.-China trade talks.
“In some ways, I think it’s better to wait until after the election if you want to know the truth. But I’m not going to say that, I just think that,” Trump said.
While Trump has made similar comments in the past, analysts said stocks remain highly sensitive to headlines and comments on the trade talks, with optimism over the prospect for a so-called phase one deal running high since early October.
In apparent response to the president’s comments, a Chinese news outlet associated with the ruling Communist Party, the Global Times, tweeted that China’s government is prepared for “even the worst-case scenario.”
The US appears to be backpedaling in #tradetalks as officials threaten tariff hikes, but that will have zero effect on China’s stance because Chinese officials have long prepared for even the worst scenario: Mei Xinyu, an expert close the Chinese Commerce Ministry pic.twitter.com/P7Ai3NYXdO
— Global Times (@globaltimesnews) December 3, 2019
Meanwhile, on Monday, the President tweeted that he was bringing back tariffs on Brazilian and Argentina steel, while the administration also proposed tariffs of up to 100% on $2.4 billion in French imports.
The U.S. is also preparing tariffs on $7.5 billion of European Union imports over illegal subsidies for European aircraft giant Airbus, following a World Trade Organization ruling that gave the U.S. a green light to impose the duties. The WTO ruled the EU hadn’t complied with an order to end the subsidies.
“The run higher seen in major benchmarks in the past few months has been built in no small part on questionable foundations with near incessant positive noises on the U.S.-China trade front seemingly the major catalyst,” said David Cheetham, chief market analyst at XTB Limited, in a note.
Read: Was Trump talk bluster or was he hinting that China talks could collapse?
Major stock indexes rallied to a series of record highs in November, but investors and analysts have warned that markets could be in for a rougher ride if concrete progress isn’t seen ahead of a Dec. 15 deadline for another round of U.S. tariffs on Chinese imports.
“Markets simply aren’t priced for this; for a trade deal to be that far in the future — if one can even be struck at all. After weeks of making generally positive noises on a deal being very close, there is a real sense now that a deal is not so very near at all and markets need to reprice,” said Neil Wilson, chief market analyst for Markets.com, in a note.
Combined with tariff threats on the European Union, Trump’s comments could be taken as a sign the White House has no qualms about levying further tariffs “and is happy using trade as a economic, political and diplomatic weapon,” Wilson said.
U.S. stocks were also pressured Monday following a weaker-than-expected reading on the Institute for Supply Management’s November manufacturing index.
See: Don’t get so excited, this economist says — the trade news isn’t that good
Which stocks are in focus?
Semiconductor stocks were under pressure amid growing uncertainty over U.S.-China trade. Advanced Micro Devices Inc.
AMD, -1.41%
was down 3.5%, Micron Technology Inc.
MU, -2.57%
had lost 3.2% and Nvidia Corp.
NVDA, -2.28%
shed 4%.
Netlfix Inc.
NFLX, -1.09%
stock after Citigroup changed the analyst covering the streaming-video company, with new analyst Jazon Bazinet cutting the rating on the stock from buy to neutral and slashing the price target to $325 from $410.
United Health
UNH, -1.63%
fell after a disappointing forecast for adjusted earnings in 2020.
Shares of Lands End Inc.
LE, +14.21%
rallied 7.3% Tuesday after the retailer reported rising profits, gross margin and same-store sales in the third quarter, though revenue fell year-over-year.
PepsiCo Inc.
PEP, -0.25%
shares were up 0.3% after the beverage-and-snacks manufacturer said it planned to buy BFY Brands Inc., maker of PopCorners snacks, for an undisclosed sum.
Shares of E.l.f Beauty Inc.
ELF, -7.81%
fell 3.5% Tuesday after shareholder Marathon Partners urged the company to consider a strategic overhaul, including a possible sale, in a letter to the board of directors.
How are other markets trading?
The yield on the 10-year U.S. Treasury note
TMUBMUSD10Y, -5.20%
fell 7.6 basis points to 1.759% after the president’s comments.
In commodities markets, the price of a barrel of West Texas Intermediate crude oil for January delivery
CLF20, -0.41%
fell 17 cents, or 0.3% to $55.80 on trade concerns, while the price of an ounce of gold for December delivery
GCZ19, +1.19%
ticked up $7.40, or 0.5%, to $1,469.70 as investors sought safe havens.
The U.S. dollar edged 0.1% lower, according to the ICE U.S. dollar index
DXY, -0.11%.
In Asia overnight, stocks traded mixed, with the China CSI 300
000300, +0.39%
gaining 0.4%, Japan’s Nikkei 225
NIK, -0.64%
declining 0.6% and Hong Kong’s Hang Seng index
HSI, -0.20%
edging 0.2% lower.
In Europe, stocks were trading mostly lower — the Stoxx Europe 600
SXXP, -0.71%
was down 0.6%.
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