Trade Tension Ping Pong: Stocks Pare Losses Yesterday, Then Dive Again Today

-edited

Equities staged an afternoon rally yesterday on news China would not walk out of trade talks. Today is another matter.

Second Thoughts

I was out doing photography in the Moab, Utah area yesterday afternoon then for Milky Way photography in the evening.

I missed the rally yesterday afternoon when stocks pared two-thirds of their Trump-inspired losses. Today, the equity markets had second thoughts.

Stocks Resume Slide

The Wall Street Journal reports Stocks Extend Decline as Trade Tensions Buffet Markets

U.S. stocks fell sharply Tuesday, their latest volatile reaction to Washington doubling down on its threats to increase tariffs on Chinese goods, heightening trade tensions.

The threats hit shares of trade-exposed companies, and concerns that new tariffs could weaken demand for oil sent energy prices and companies lower.

The Dow Jones Industrial Average slid 419 points, or 1.6%, to 26015 while the S&P 500 fell 1.6% and the tech-heavy Nasdaq Composite lost 1.7%.

China reiterated today that it would not back out of trade talks. The markets did not care.

For a discussion of the pair of Tweets from Trump that coincides with the volatility, please see:

  1. Trump to Hike Tariff Rate on $200 Billion in Chinese Goods: Two Tweets Two Lies
  2. Trump's Trade Tactics Rattle Markets, China Ponders Canceling Talks

I still expect a deal, with much fanfare. It will not do much of anything.

US budget deficits and the US dollar reserve currency status suggest it will be a struggle to reduce trade imbalances no matter what China claims it will do.

Mike "Mish" Shedlock

Comments (13)
No. 1-8
Bam_Man
Bam_Man

"Ran every stop, on Mom and Pop."

Succinctly sums up market "action" of the past two days.

abend237-04
abend237-04

I doubt that Xi has the political capital to change China's trade policies to accommodate Trump's demands even if he wanted to. And when I ask myself if I'd want to change if I were him, the answer always comes back the same: No. China's mercantilism has freed 700 million Chinese from mud huts and grinding poverty since Deng launched it in 1979. On the other hand, Trump knows there is no viable political constituency for fiscal responsibility in this country. You can't be elected dog catcher today advocating fiscal responsibility, much less president. There will be a much-vaunted deal done soon just to get the algo-driven quants away from their keyboards before they wreck the world again, but not much will change.

Menaquinone
Menaquinone

A coordinated offensive between Gaza and Iran gave the trots to DOD. My Persian friends back from Dubai were looking glum two weeks ago. Israeli intelligence says Iran is on the march with nuclear weapons. I'm calling separate events for the two day action. Trade one yesterday. Nuclear war today.

lol
lol

Trump will eventually sellout like he did with that smoke n mirrors USMCA nonsense.He's so desperate for a deal he'll sign anything WHILE on his knees kissing Beijeng's ass,for a fat old guy that's a lot harder to do than it seems!

AWC
AWC

DC insiders must be rakin' in the bucks with this volatility.

FromBrussels
FromBrussels

The financial/social/economic monstrously over endebted, eternal growth craving system is at the end of its wits, that much is clear, which will eventually lead to very serious and dangerous geo political conflicts ! Maybe and hopefully there ll be an agreement not to use nuclear stuff but I wouldn t bet my ass on it, civilization or civilized behaviour is merely a thin veneer build up under ideal circumstances, it might melt away in a jiffy when it comes to it....But hey, lets buy on the dips anyway, and hope for a miracle to happen ....

CCR
CCR

Equity Markets don't move because of China. Equity Markets move because they were predisposed to move that way anyway. Soooo many China headlines and none of it matters. Markets make China THE news. China doesn't make the markets. That is a ridiculous chart.