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James Hyerczyk
U.S. Equity Markets

As much as investors want to place the blame of this week’s stock market decline on President Trump’s comments earlier in the week about postponing a trade deal until after the 2020 election, weaker than expected U.S. economic data has to share the blame. And the hits could keep coming if Friday’s Non-Farm Payrolls report disappoints.

The week started with the Dow Jones Industrial Average plunging 268 points. The S&P 500 Index dropped 0.86% and the NASDAQ Composite pulled back 1.12%. Traders returned from the holiday-shortened week, kicking off December with a sell-off that was fueled by a combination of weak economic data and trade worries.

Weak Manufacturing Data at the Forefront

On Monday, the Institute for Supply Management said U.S. manufacturing activity in the U.S. contracted more than expected in November. The disappointing data sent the major averages tumbling. Monday’s manufacturing data led investors to take profits with the averages near record highs.

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Trade Worries Increase

Investors also grappled with negative rhetoric on the U.S.-China trade front. President Trump said China wants to make a trade deal, but “we’ll see what happens.” Concerns were also raised that a deal may not be signed before December 15, which is a key deadline for the negotiations.

Tuesday’s Sell-off was on Trump

The selling pressure resumed on Tuesday, fueled by President Trump’s latest comments on the U.S.-China trade war that sent stocks tumbling.

Trump suggested on Tuesday he may want to hold off on a U.S.-China trade deal until after next year’s presidential election. Trump downplayed the drop in the markets, calling it “peanuts.”

Negative trade rhetoric from Commerce Secretary Wilbur Ross also put investors on edge after increased expectations that some kind of deal would get signed this month.

Stocks Rose on Wednesday as US and China Reportedly Move Closer to Deal

The Dow jumped 147 points or 0.53% as U.S.-China trade talks were once again the main catalyst on Wall Street as investors cheered apparent optimism around the negotiations.

Bloomberg News reported, citing people familiar with the talks, that China and the U.S. were getting close to reaching a trade deal. The report helped stocks end a three-day losing streak and rebound from steep losses in the previous session.

While investors were focusing on the optimistic trade deal news, a couple of disappointing economic reports raised flags about the strength of the economy.

U.S. services sector activity slowed more than expected in November amid lingering concerns about trade tensions and worker shortages. The news could revive fears about the economy’s health because the services sector accounts for more than two-thirds of U.S. economic activity.

Job growth slowed to a crawl in November, with private payrolls increasing by just 67,000, according to an estimate Wednesday from ADP and Moody’s Analytics. The count was well below the 150,000 consensus from economists surveyed by Dow Jones and the lowest month since May.

Thursday was a Dud

All the Dow could muster on Thursday was a measly 28 point gain. Stocks flatlined most of the session as investors took to the sidelines ahead of Friday’s U.S. Non-Farm Payrolls report. The lack of fresh trade news may have kept a lid on prices, while strong U.S. economic data may have underpinned the market.

The Labor Department said weekly jobless claims fell to their lowest level in seven months, quelling fears about the jobs market stoked Wednesday by the disappointing ADP private payrolls data.

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