Stock market on hold as apprehension grows before US-China negotiations

Stock market on hold as apprehension grows before US-China negotiations

Stock Markets Tread cautiously as U.S.-China Tariff Talks Approach

Wall Street seesawed on Friday as investors grappled with President Donald Trump's latest remarks on U.S.-China tariffs before the colossal trade talks between the two powers this weekend. Trump hinted at opening China's market to the U.S. and proposed 80% tariffs on Chinese goods, currently at 145%, might be just right.

Representatives from both nations will converge in Switzerland to discuss tariffs, leaving investors hopeful that the talks would alleviate the ruthless trade war that's raised apprehensions over global economic growth and kept everyone on tenterhooks.

According to Michael Matousek, head trader at U.S. Global Investors, even if the tariffs are reduced to 80%, many people may still hesitate to purchase goods due to the hefty levies. Matousek suspects that investors are trimming their portfolios ahead of the negotiations as they aren't sure how long the discussions will last or when a significant outcome will transpire.

Following the positive news of a trade deal between the UK and the U.S. (the first since Trump halted his initial tariffs last month), Wall Street's main indexes soared on Thursday.

Reports suggest that India has proposed reducing its tariff gap with the U.S. to less than 4% from almost 13% now, in exchange for an exemption from Trump's tariffs[1].

As of 11:21 a.m. ET, the Dow Jones Industrial Average dipped 127.16 points, or 0.31%, to 41,241.29, the S&P 500 fell 5.14 points, or 0.09%, to 5,658.80, and the Nasdaq Composite declined 2.84 points, or 0.02%, to 17,925.30[2].

The energy sector led gains among the 11 S&P 500 sectors, while funds tracking consumer discretionary stocks excelled during the week that ended Wednesday. Financial sectors, however, suffered the most[2].

Majority of megacap and growth stocks faltered, but Tesla outshone with a 5.6% rise. All three indexes are on track for marginal declines this week, but they're close to levels seen in late March, having recovered all losses incurred after Trump's "Liberation day" tariff announcement last month[2].

After the Federal Reserve left interest rates unchanged, Fed policymakers expressed concerns over increasing economic risks from Trump's tariffs, echoing previous comments from Chair Jerome Powell during the meeting this week.

With the peak of the earnings season behind, about 76% of S&P 500 companies have surpassed profit expectations. However, many of them have withdrawn their annual forecasts due to uncertainty in the trade environment.

Stocks like Expedia slumped 7.7% after missing quarterly revenue estimates, while Trade Desk shares skyrocketed about 22% following a better-than-expected first-quarter revenue and profit[1]. On the opposite end, insulin delivery device maker Insulet leaped 18.5% after beating estimates for first-quarter profit.

Advancing issues outnumbered decliners by a 1.54-to-1 ratio on the NYSE and by a 1.01-to-1 ratio on the Nasdaq. The S&P 500 listed 3 new 52-week highs and 1 new low, while the Nasdaq Composite recorded 39 new highs and 58 new lows[2].

In conclusion, the upcoming U.S.-China trade talks have rekindled some optimism on Wall Street, causing a brief surge in major indexes and the U.S. dollar based on hopes of tariff reductions and lessening trade frictions. Yet, investors remain cautious, realizing that these discussions may only mark the initial phase of longer-term resolutions[1][2].

[1] - These discussions are viewed as a potential diplomatic breakthrough, but are more a means to a comprehensive trade agreement at this stage. As a result, investors remain skeptical and have tempered their enthusiasm in the markets.

[2] - Bonds saw modest gains, with the yield on 10-year U.S. Treasuries slightly dropping to 4.35%, and the dollar's rally paused. This is indicative of investors' push for safe-haven assets.

1. Wall Street's cautious posture persists as investors ponder Donald Trump's tariff proposals ahead of U.S.-China trade talks.
2. Despite hints of trade concessions from Trump and the potential reduction of tariffs to 80%, investors remain apprehensive and are trimming their portfolios.
3. The energy sector leads gains among S&P 500 sectors, while consumer discretionary funds perform exceptionally well, although financial sectors face downturns.
4. Majority of megacap and growth stocks falter, with Tesla as the notable exception; it records a 5.6% rise.
5. The Federal Reserve's concerns over rising economic risks due to Trump's tariffs prompt some market participants to seek safe-haven assets, such as bonds.
6. Stocks like Expedia and Insulet show significant movements based on their financial performance, with Insulet outshining due to a successful quarter.
7. With nearly 76% of S&P 500 companies surpassing profit expectations, some companies still hesitate to release their annual forecasts due to uncertainties in the trade environment.
8. There is skepticism among investors regarding the pending U.S.-China trade talks, viewing these discussions as a precursor to a comprehensive trade agreement rather than a definitive resolution.
9. The volatility in the general-news and business sectors continues to be influenced by trade tariff talks, technology advancements, and financial market fluctuations.

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