US Stock Market: Trade Deal is Still Number One Concern for Investors

The major U.S. equity indexes traded mostly rangebound on Thursday before closing lower for the session. The indexes rallied early before that turned into a choppy, two-sided trade as the latest U.S.-China trade developments underpinned prices, while gains were capped by political uncertainty after the whistleblower complaint against President Donald Trump was released and assessed.

In the cash market, the benchmark S&P 500 Index settled at 2977.62, down 7.25 or -0.26%. The blue chip Dow Jones Industrial Average finished at 26891.12, down 79.59 or -0.31% and the technology-based NASDAQ Composite closed at 8030.66, down 46.72 or -0.61%.

Headed into Friday, all three indexes are trading lower for the week, but up over 1.00% for the month.

U.S.-China Trade Relations

Given all the political turmoil in Washington this week, Art Hogan, chief market strategist at National Securities made a keen observation saying, “It always amazes me how, despite everything else that is happening, the thing the market pays the most attention to is China trade. If you rank things in an algorithm, trade would be at the top.”

Thursday’s trade reflected this assessment for the most part with stocks falling to their session lows after Bloomberg News reported, citing a source, that the U.S. is unlikely to extend a temporary waiver that allows U.S. companies to sell supplies to Huawei, a Chinese telecommunications giant.

The indexes then rebounded to hit their highs for the session after China’s foreign Minister Wang Yi said he U.S. has shown good will by waiving tariffs and China is willing to buy more American products, Reuters reported.

Earlier in the week, stocks fell when President Trump said he would not accept a “bad deal” with China. However, that comment was offset by a bullish remark on Wednesday with Trump saying that a U.S.-China trade deal could arrive sooner-than-expected. Investors received another dose of optimism when Bloomberg News reported China is expected to increase its U.S. soybeans purchases during trade talks next month.

This week’s reactions to U.S.-China news bits is laying the groundwork for even bigger price swings when the two economic powerhouses meet early next month.

Impeachment Inquiry on President Trump

At times on Thursday, traders were caught in the grips of growing uncertainty over President Trump’s political future. The price action suggests investors haven’t made up their minds about how to play the early rounds of the impeachment process. So far this week, all we’ve seen is investors taking some protection when the impeachment inquiry was initially announced.

Most analysts agree that it is too early to determine the outcome of the impeachment process at this early stage. Some say it won’t be a market moving issue.

Joseph Lupton, senior global economist at J.P. Morgan, said in a note “… the impeachment process could either amplify or mute other looming geopolitical risks.”

Tom Martin, senior portfolio manager at Globalt said, “The bigger issue is how does this impact Trump’s negotiating power with China.”

Both comments point back to Art Hogan’s comment that “the thing the market pays the most attention to is China trade.”