Wall Street closed in the red on Monday after doubts on the progress of U.S.-China trade negotiations marred investor sentiment. Investors grew skeptical of President Donald Trump’s Phase I trade deal after Chinese officials said they wanted another round of talks before committing the deal to paper.
The three major indexes— the Dow Jones Industrial Average, S&P 500 and Nasdaq Composite — declined 0.1% each on Oct 14. Dow Jones hit 26,787.36 at the end of the trading session while S&P 500 and Nasdaq Composite closed at 2,966.15 and 8,048.65 respectively. The fear-gauge CBOE Volatility Index (VIX) rose 10.5% to close at 13.95 on Monday. Finally, decliners outnumbered advancers on the NYSE by a 1.32-to-1 ratio.
China Wanted More Dialogue Before Signing Phase I Deal
Major indexes broke a three-day winning streak on Oct 14 after rising substantially on Oct 11. The primary reason behind this was the lack of clarity on the progress of the President’s Phase I trade deal. While Trump noted that last week’s trade talks in Washington were a success, China wants to hold another round of trade talks before signing the first phase of the deal. It is unclear where the trade talks might take place.
According to Bloomberg, China also wanted the United States to get rid of a tariff hike scheduled for December. After last week’s trade talks were concluded, Trump said that both countries had reached a “very substantial phase one deal.”
According to the Phase I trade deal; China will purchase about $40 billion-$50 billion worth of U.S. agricultural products and also address United States’ concerns on intellectual property rights. In return, the United States has agreed to hold off a tariff increase scheduled for the week ending Oct 19.
While Trump called the discussions “substantial progress”, the Chinese state media underplayed the trade talks. In fact, the Chinese side appeared less interested in securing a deal without setting few key details straight first. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
New Tariffs Possible on Chinese Goods in December
Investors grew further skeptical of a U.S.-China trade deal after Mnuchin said on Oct 14 that a fresh set of tariffs scheduled for December 15 could be put in place on Chinese goods if a trade deal doesn’t come through by then.
Mnuchin added that the two countries “have a fundamental agreement that is subject to documentation.” Some of the crucial issues that were discussed during the recently held trade talks were intellectual property rights, financial services and “structural issues” related to agriculture, the Treasury Secretary said.
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