Stocks rally af­ter los­ing year’s gains amid jit­ters

The Washington Times Daily - - FRONT PAGE - BY DAVE BOYER AND S.A. MILLER

Stocks re­cov­ered in a late rally Thurs­day af­ter nearly wip­ing out all gains for the year, cap­ping a tu­mul­tuous trad­ing day that re­flected in­vestors’ per­sis­tent jit­ters over the U.S. trade war with China and fears of a weak­en­ing global econ­omy.

The Dow Jones In­dus­trial Av­er­age fell more than 1,500 points in two days be­fore par­ing Thurs­day’s losses to 79 points, or 0.32 per­cent, to close at 24,948. The S&P 500 was down 0.15 per­cent, while the tech-heavy Nas­daq fin­ished the day up 29.83 points, or 0.42 per­cent.

An­a­lysts blamed a com­bi­na­tion of wor­ries over Pres­i­dent Trump’s trade war with China, low oil prices, con­cerns about the Bri­tish Par­lia­ment’s abil­ity to ap­prove a Brexit deal and the ar­rest of a Chi­nese high-tech ex­ec­u­tive wanted by the U.S.

The pres­i­dent thought he

had eased the con­cerns about tar­iffs last week­end when he reached a hand­shake deal with Chi­nese Pres­i­dent Xi Jin­ping for a 90-day pause in the trade war to im­ple­ment spe­cific agree­ments on cer­tain ex­ports such as oil and agri­cul­tural prod­ucts.

But in­vestors’ wor­ries ap­peared to ac­cel­er­ate Thurs­day, even af­ter Bei­jing be­lat­edly gave an up­beat con­fir­ma­tion of the un­writ­ten agree­ment with the U.S.

The ar­rest of Meng Wanzhou, chief fi­nan­cial of­fi­cer of the Chi­nese tele­com gi­ant Huawei, re­in­forced con­cerns about the dif­fi­cul­ties of reach­ing a com­pre­hen­sive trade deal. Mr. Trump has ac­cused China of steal­ing cut­ting-edge tech­nol­ogy from the U.S.

“You have got the news overnight of the ar­rest of the CFO of Huawei that I think is throw­ing a real mon­key wrench into the pos­i­tive op­ti­mism that sur­rounded the week­end meet­ing,” said Katie Nixon, chief in­vest­ment of­fi­cer for the wealth man­age­ment divi­sion of North­ern Trust in Chicago.

China’s gov­ern­ment said Thurs­day that it would promptly carry out the tar­iff cease-fire with Wash­ing­ton. It also ex­pressed con­fi­dence that the two nations can reach a trade agree­ment. The re­marks sug­gest Bei­jing wants to avoid dis­rup­tions from Ms. Meng’s ar­rest. Even so, in­vestors re­mained skep­ti­cal. Mean­while, OPEC wrapped up a meet­ing in Vienna with­out agree­ing on a so­lu­tion to fall­ing oil prices. Some an­a­lysts said the oil mar­ket sit­u­a­tion, along with Mr. Trump’s threats this week to im­pose higher tar­iffs on Chi­nese ex­ports if a deal falls through, is cre­at­ing more un­cer­tainty for in­vestors.

“Af­ter Pres­i­dent Trump’s ‘Tar­iff Man’ tweet, mar­kets were al­ready ques­tion­ing the progress on the tar­iff bat­tle with China — or lack thereof — as ev­i­denced by Tues­day’s rout,” Randy Fred­er­ick, vice pres­i­dent of trad­ing and de­riv­a­tives at the Schwab Cen­ter for Fi­nan­cial Re­search, told The Wash­ing­ton Times. “I think the ar­rest of the Huawei CFO in Canada has thrown more fuel on the fire.”

Com­bined with Brexit wor­ries and other fac­tors, he said, “you have a recipe for more down­side.”

At one point dur­ing Thurs­day’s trad­ing ses­sion, all three of the ma­jor U.S. stock in­dexes were down more than 3 per­cent, putting each back in the red for the year.

Losses might have been pared by a Wall Street Jour­nal re­port less than an hour be­fore the closing bell that sug­gested the Fed­eral Re­serve could adopt a wait-and-see ap­proach on in­ter­est rate in­creases. That was re­lief to in­vestors wor­ried that the Fed might raise in­ter­est rates too quickly, which could choke off eco­nomic growth.

“The Fed is try­ing to, in essence, come out and make it clear they are not on a rigid sched­ule of rate hikes next year,” said Quincy Krosby, chief mar­ket strate­gist at Pru­den­tial Fi­nan­cial.

Still, the tem­po­rary eras­ing of most of the mar­ket’s gains in 2018 comes af­ter one of the best years on record. In 2017, the Dow rose 25 per­cent, the S&P 500 climbed 19 per­cent and the tech-heavy Nas­daq jumped 28 per­cent.

“The mar­kets are in dis­ar­ray while the econ­omy re­mains in good shape,” said Joel Naroff, pres­i­dent of Naroff Eco­nomic Ad­vi­sors Inc. in Holland, Penn­syl­va­nia. “To the ex­tent that the un­cer­tain mes­sages be­ing sent about the sta­tus of trade ne­go­ti­a­tions with China are cre­at­ing fear, there is ev­ery good rea­son to mark down val­ues. That is es­pe­cially true if you be­lieve, as I do, that val­ues were prob­a­bly too high to be­gin with.”

Aside from trade, con­cerns over bond yields and in­ter­est rates have pres­sured the stock mar­ket in re­cent days.

Traders con­tin­ued to shovel money into bonds, a sig­nal that they see weak­ness in the econ­omy ahead. The yield on the 10-year Trea­sury note fell to 2.89 per­cent from 2.92 per­cent on Thurs­day, a big move, as traders scaled back ex­pec­ta­tions on the num­ber of rate hikes the Fed would im­ple­ment amid weak­en­ing eco­nomic data and mar­ket volatil­ity.

“The mar­ket seems right now to be fo­cused on in­creased risks for a 2020 re­ces­sion,” said Pa­trick Schaf­fer, global in­vest­ment spe­cial­ist at JPMor­gan Pri­vate Bank. “It’s a very hard mar­ket to buy when you see re­ally strong sig­nals that we are in­deed late [in the eco­nomic] cy­cle.”

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