Today we’re seeing both the S&P 500 and Dow Jones industrial average trend slightly down.
That gels with market activity toward the end of yesterday, as reported in Zacks Equity Research this morning.
“Markets closed in the red on Monday after reports surfaced that there might be a formal trade deal between the United States and China by the end of this month,” Zacks analysts write this morning. “Investors initially welcomed such developments only to become cautious later in the session. Further, Wall Street‘s two-month rally has led to stocks becoming increasingly expensive. This also dampened market sentiment.”
It’s interesting that Zacks analysts characterize investors as initially enthusiastic, but later reluctant. What caused the change?
This is in the context of a visceral issue that’s been moving markets for some time. Ever since the seemingly gratuitous belligerence of the American White House to Chinese imports, the US and China have been successively trading blows and then sitting down to the deal-making table. So now there are indications that a deal is in the making.
The markets have been stable and seemingly unprovoked by threats of a broader trade war. But the carnage to the American farmer and damage in other sectors is evident – hiccups in the export of things like beef and soybeans which are major markets for American businesses.
“American soybean farmers have been among the hardest hit by China’s tit-for-tat tariffs,” wrote Jeff Daniels at CNBC at the end of last year, characterizing American farmers as “cautiously optimistic.”“Through Friday, U.S. soybean futures are down 11 percent from prices set in early April before the 25 percent tariff on U.S. soybeans was announced by Beijing.”
Here’s hoping those “additional damages” are not forthcoming.
In further analysis Zacks credits the CBOE volatility index at a 6.7% increase, while also noting losses on the Dow and S&P 500.
Then there’s domestic consumer spending:
“On the economic data front, the U.S. Department of Commerce reported that U.S. construction spending for the month of December declined 0.6%,” analysts explain. “The consensus estimate for the period was an increase of 0.2%.”
Zach’s ends analysis by noting biotech stocks have potential to soar:
“The biotech sector is projected to surge beyond $775 billion by 2024 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.”