Stocks fiz­zle af­ter early gains, suf­fer 1st loss in 6 days

The News-Times - - BUSINESS -

U.S. stocks fell Tues­day for the first time in six days af­ter the re­cent up­ward mo­men­tum gave way to lin­ger­ing con­cerns about the U.S. trade war with China.

De­fense con­trac­tors suf­fered steep de­clines and tech­nol­ogy stocks gave up most of their early gains, tak­ing the steam out of an early rally on Wall Street. The Dow Jones In­dus­trial Av­er­age closed with a loss of 14 points af­ter ris­ing as many as 186 in the morn­ing.

The mar­ket had ral­lied for five straight days since the Fed­eral Re­serve sig­naled it is open to cut­ting in­ter­est rates if needed to sta­bi­lize the econ­omy rat­tled by trade dis­putes. The gains had erased much of the S&P 500’s 6.6 per­cent de­cline in May. But Tues­day, con­cerns that the U.S. trade spat with China could be pro­longed and hurt growth in the world’s two big­gest economies dimmed in­vestor en­thu­si­asm.

Katie Nixon, chief in­vest­ment of­fi­cer at North­ern Trust Wealth Man­age­ment, said there is no clear res­o­lu­tion in sight to the trade war and in­vestors will have to get ac­cus­tomed to un­cer­tainty hang­ing over the mar­ket.

“The mar­ket’s go­ing to be re­ally sen­si­tive to trade news,” she said. “This is go­ing to be very hard to re­solve neatly and quickly.”

Pres­i­dent Don­ald Trump has said he plans to meet with Chi­nese Pres­i­dent Xi Jin­ping at the Group of 20 sum­mit late this month in Osaka, Ja­pan. But Trump re­it­er­ated Tues­day that if the two can’t reach an agree­ment on trade, he’ll pro­ceed with tar­iffs on $300 bil­lion in im­ports from China that aren’t al­ready sub­ject to tar­iffs.

De­fense com­pa­nies were the big­gest de­clin­ers in the S&P 500. The mar­ket on Mon­day wel­comed news of a megamerger be­tween Raytheon and United Tech­nolo­gies, but the stocks dropped sharply Tues­day. Raytheon lost 5.1 per­cent and United Tech­nolo­gies shed 4 per­cent. L3 Tech­nolo­gies fell 4.4 per­cent and Har­ris Corp. dropped 4.3 per­cent. On Mon­day, Trump ex­pressed some reser­va­tions about the Raytheon-United Tech­nolo­gies tie-up.

Tech­nol­ogy stocks also gave up some early gains. Adobe fell 1.6 per­cent and Ad­vanced Mi­cro De­vices fell 2.5 per­cent. The tech sec­tor is still nearly 24 per­cent so far this year, the best per­former among the 11 sec­tors in the S&P 500.

Con­sumer-fo­cused stocks and in­ter­net com­pa­nies were among the gain­ers. Face­book rose 1.9 per­cent and Ver­i­zon gained 1.2 per­cent. Wal­greens rose 1.1 per­cent and Dol­lar Tree rose 2.7 per­cent.

The S&P 500 slipped 1.01 point, or 0.03 per­cent, to 2,885.72. The Dow fell 14.17 points, or 0.1 per­cent, to 26,048.51. The Nas­daq com­pos­ite slipped 0.60 of a point to end at 7,822.57. The Rus­sell

2000 in­dex of small com­pa­nies fell

4.45 points, or 0.3 per­cent, to

1,519.11.

John Lynch, chief in­vest­ment strate­gist at LPL Re­search, said in a note to clients that a trade deal with China “is un­likely un­til more eco­nomic pain is in­curred by both China and the United States.” That pain will even­tu­ally push the two sides to strike a deal, he said.

Both Lynch and Nixon said that the longer the trade war goes on, and tar­iffs are in place against Chi­nese goods, the more likely it is that the Fed will cut rates. The fu­tures mar­ket is in­di­cat­ing that in­vestors ex­pect the Fed to cut its bench­mark in­ter­est rate as early as its July pol­icy meet­ing.

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