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James Hyerczyk
U.S. Stock Market

The major U.S. equity indexes retreated on Wednesday in a limited trade as trade tensions intensified. Sellers continued to press the market in reaction to weak retailer shares, while technology woes persisted due a steep decline in shares of Qualcomm. Investors also digested the minutes from the Federal Reserve’s May 1-2 meeting. The minutes showed the central bank will not make any move regarding rates “for some time.”

In the cash market, the benchmark S&P 500 Index settled at 2856.27, down 8.09 or -0.29%. The blue chip Dow Jones Industrial Average finished at 25776.61, down 100.72 or -0.39% and the technology-based NASDAQ Composite closed at 7750.84, down 34.88 or -0.47%.

Trade Tensions Intensified

Stocks were pressured on Wednesday after Treasury Secretary Steven Mnuchin told CNBC’s Ylan Mui that a trip to Beijing to retake trade negotiations has not been scheduled yet. This lowered hope of a speedy resolution to the U.S.-China trade war.

Also, restrictions on Chinese telecom giant Huawei have led China to rethink its entire economic relationship with the U.S., according to a report from The South China Morning Post. The report went on to say China is considering dropping purchases of natural gas from the U.S.


Retailer Shares Weaken

Retail stocks tumbled on Wednesday after the release of quarterly results from major companies in the sector. Individually, Lowe’s fell 11.9% on weaker-than-expected earnings. Nordstrom dropped 9.3% as its quarterly earnings and revenue missed expectations. Shares of Target performed better than most retailers, rising more than 9% as its earnings and revenue topped analyst expectations. Additionally, same-store sales, a key metric for retailers, also surpassed estimates.

Qualcomm Drags Technology Sector Lower

Legal problems drove Qualcomm shares lower by 10.9%, the company’s biggest one-day drop since January 23, 2017. The catalyst for the sell-off was a ruling by a U.S. judge that the chipmaker violated antitrust law by unlawfully suppressing competition in the cellphone chip space. For the month, Qualcomm is down 19.5%.

The bearish move by Qualcomm spread across the semiconductor sector with the closely watched VanEck Vectors Semiconductor ETF (SMH) falling 1.9%.

Little Reaction to Fed News

Before the release of the minutes from the U.S. Federal Reserve’s May monetary policy meeting, St. Louis Fed President James Bullard said central bank policymakers may have raised rates too much last year. “Rates are at a good place in the U.S. right now, if anything we are a little restrictive I would say,” he told Bloomberg News. “I am concerned we may have slightly overdone it with our December rate hike but I was pleased that the committee pivoted.”

The Fed minutes had little impact on stock prices as it was already priced into the market. The minutes were largely interpreted as accommodative, which tends to be supportive for stocks. Fed policymakers agreed the current accommodative policy can remain for now and that they were comfortable with the wait-and-see approach.

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