Wall Street drops on Trump threats of shutdown, NAFTA Investors look for clues from Jackson Hole
US stocks opened sharply lower yesterday, giving back some gains from a day earlier, after President Donald Trump warned of a government shutdown to build the Mexico border wall and also threatened to scrap a trade agreement with Mexico and Canada.
“If we have to close down our government, we’re building that wall,” Trump said at a rally in Phoenix, Arizona on Tuesday evening. The comments came as lawmakers face a late-September deadline to raise the US debt ceiling or risk a default, and hours after a lawmaker said there was “zero chance” of the US not raising the ceiling. Trump also said he might scrap the North American Free Trade Agreement with Mexico and Canada to jumpstart negotiations. The first round of talks on Sunday, with the aim to revamp the NAFTA by early 2018.
Investors have grown increasingly concerned about Trump’s ability to legislate his pro-growth agenda, especially those of tax cuts and infrastructure spending, given the near constant political rumblings in the White House. “The pullback is from pretty strong words out of the president ... comments on NAFTA, which brings up a question of a global trade war, is weighing,” said Peter Cardillo, chief market economist at First Standard Financial in New York.
“You can have a tax cut, but if you have a trade war, that is going to impact the economic growth,” Cardillo said. The Dow Jones Industrial Average was down 77.83 points, or 0.36 percent, at 21,822.06 and the S&P 500 was down 8.3 points, or 0.34 percent, at 2,444.21. The Nasdaq Composite was down 21.88 points, or 0.35 percent, at 6,275.60.
Investors are also jittery ahead of the annual gathering of global central bankers in Jackson Hole, Wyoming, where Federal Reserve Chair Janet Yellen’s Friday speech will be scrutinized for clues on the central bank’s stand on monetary policy. Nine of the 11 major S&P indexes were lower, with consumer discretionary index’s 0.60 percent fall leading the decliners. Lowe’s 4.7 percent fall weighed the most on the S&P after the company reported a lower-than-expected profit and cut its margins forecast.
Bigger rival Home Depot dropped 1.34 percent, weighing the most on the Dow. Shares of advertising firm Omnicom dropped nearly 5 percent, while Interpublic Group fell 4.3 percent after WPP cut its sales forecast for the second time in 6 months. WPP’S US-listed shares sank 11.2 percent. Declining issues outnumbered advancers on the NYSE by 1,793 to 715. On the Nasdaq, 1,646 issues fell and 671 advanced.
Jackson Hole
European and US stocks slid yesterday as investors looked ahead to an meeting of central bankers for insights on monetary policy. “A sense of anticipation can be felt across the financial markets ahead of the Jackson Hole Symposium later this week, which could offer an opportunity for central banks to signal policy shifts,” said analyst Lukman Otunuga at online currency trading brokerage FXTM. “Financial heavyweights such as Mario Draghi and Janet Yellen will be in the spotlight, with markets closely scrutinizing their speeches for fresh insight on the outlook for monetary policy and interest rates,” he added.
Investors will be hoping for fresh clues from US Federal Reserve boss Yellen about the bank’s plans to reduce its huge bond holdings. European Central Bank chief Draghi’s speech will also be closely watched as Frankfurt-based policymakers move towards cutting back their bond purchases.
London stocks were down 0.2 percent in afternoon trading, while Paris was off 0.3 percent and Frankfurt lost 0.4 percent. The Dow dropped 0.4 percent in opening trading. “US stocks are lower in early action following yesterday’s solid advance, with global trade concerns and Friday’s looming speeches from Fed Chair Yellen and ECB President Draghi likely keeping conviction in check,” said analysts at Charles Schwab brokerage. Global equities rallied on Tuesday on renewed optimism over US tax reform plans, but President Donald Trump’s comments about terminating a key trade agreement. The stronger yen pared some gains in Tokyo where the benchmark Nikkei 225 index ended 0.3-percent higher yesterday, while Seoul and Taipei edged up 0.1 percent and Singapore was flat.
But Shanghai ended 0.1-percent lower and Sydney slipped 0.2 percent. Hong Kong’s stock market was closed as powerful Typhoon Hato brought the southern Chinese city to a standstill.
The euro gained against the dollar following well-received eurozone data, analysts said. “Manufacturing and services PMIs from the eurozone, Germany and France were all very strong and well above the level that separates growth from contraction, suggesting that the recovery is continuing to gain traction,” said Craig Erlam, senior market analyst at Oanda trading group. —Agencies