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Stocks Pull Back On Trade Talk Tensions, Deadline Approaches

Stocks were down yesterday as trade tension fears unnerved the market.

After a blistering 4-week rally that sent stocks sharply higher, a bit of a pullback was to be expected.

But reports that the U.S. had canceled a trade planning meeting with China weighed on stocks more heavily. However, I believe this news has been misinterpreted.

Larry Kudlow, the White House economic advisor, denied that a meeting had been canceled as no intermediate meetings had been scheduled other than the visit by Vice Premier Liu He next week (which is still on).

While a trade planning meeting was apparently discussed (ahead of next week's scheduled meeting), it was only the face-to-face planning session that was declined, and not the scheduled meeting next week. And it was suggested that the planning talks may still take place over the phone instead.

Moreover, it was reiterated that both 'teams remain in touch in preparation for high level talks' at the end of this month.

As I had mentioned before, there will be positive trade talk reports and negative trade talks reports as we approach the February 28th deadline. The news has been pretty positive over the last four weeks. But yesterday was a little negative (rightly or wrongly so). Yet the mixture of both hot and cold reports should be expected as we get closer to the due date. For now however, the overall narrative remains more upbeat and optimistic.

Meantime, earnings season continues with another 96 companies reporting today.

And we'll also get numbers on housing via the MBA Mortgage Applications report, retail sales via the Redbook report, and manufacturing via the Richmond Fed Manufacturing Index.

Should be a busy day.

See you tomorrow,

Kevin Matras

Executive Vice President, Zacks Investment Research


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