US Equities Down on Renewed Trade Worries

The major U.S. stock indexes finished lower on Thursday just one day after the U.S. Federal Reserve trimmed its benchmark interest rate 25-basis points as expected and signaled it would hit the pause button until future notice. Furthermore, Fed Chairman Jerome Powell said rates wouldn’t rise until inflation moved higher.

In the cash market on Thursday, the benchmark S&P 500 Index settled at 3037.56, down 9.21 or -0.31%. The blue chip Dow Jones Industrial Average finished at 27046.23, down 140.46 or -0.52% and the technology-based NASDAQ Composite closed at 8292.36, down 11.62 or -0.14%.

Buy the Rumor, Sell the Fact Situation

If the stock market was at a major bottom, the Fed news would’ve been bullish. But the S&P 500 Index and NASDAQ Composite were coming off all-time highs so the price action suggests a “buy the rumor, sell the fact” situation.

The Fed news is dovish in my opinion, especially the comment that rates won’t go up until inflation goes up. It sounds like a green light to me for further upside action, however, worries about valuation at current price levels may have led investors to trim a little off the top on Thursday. Furthermore, some investors may have decided to take profits ahead Friday’s U.S. Non-Farm Payrolls report.

Renewed U.S.-China Trade Concerns

Tempering recent optimism around trade was a Bloomberg report that said Chinese officials have doubts about whether it is possible to reach a comprehensive long-term trade deal with Washington and U.S. President Donald Trump.

The U.S.-China trade news had a negative impact on the trade-sensitive industrials sector that fell 1.23%, while China exposed chipmakers also fell, with the Philadelphia Semiconductor Index slipping 1.14%.

Helping to soften some of the concerns was President Trump, who said the two countries would soon announce a new site where a “Phase One” trade deal will be signed after Chile cancelled a planned summit set for mid-November.

Earnings Remain Positive

Corporate earnings were a bright spot. Apple Inc. rose 2% after the iPhone maker forecast sales for the holiday shopping quarter ahead of expectations. Facebook Inc. gained 2% after reporting an uptick in users in lucrative markets and its third straight rise in quarterly sales growth.

Kraft Heinz Co. jumped 13% as the packaged foods company said it was spending more on marketing key brands next year, after reporting a better-than-expected third-quarter profit. Estee Lauder Cos. Inc. fell 4.8% after the cosmetics maker cut its forecast for full-year profit.

At the end of the month, two thirds of the S&P 500 have reported quarterly numbers. Of those companies, 75% posted better-than-expected results, FactSet data shows.