Market Overview

Markets Still Spooked By Trade Fears; Tech Sector Leads Stocks Lower

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Markets Still Spooked By Trade Fears; Tech Sector Leads Stocks Lower

Tech shares dragged the entire market down Monday as traders readied for continued blows between the U.S. and Chinese governments.

Among others:

Intel Corporation (NASDAQ: INTC) sold off 3.4 percent;

Facebook, Inc. (NASDAQ: FB) 2.7 percent;

Amazon.com, Inc. (NASDAQ: AMZN) 3.1 percent;

Netflix, Inc. (NASDAQ: NFLX) 6.5 percent; and

Alphabet Inc (NASDAQ: GOOGL) 2.6 percent.

Consequently, PowerShares QQQ Trust, Series 1 (ETF) (NASDAQ: QQQ) closed down 2.3 percent, the S&P 500 Index 1.3 percent and the Dow Jones Industrial Average 1.3 percent. The Dow closed at 24,252.80, below its 200-day moving average for the first time in over 500 days.

What Happened

Fears mounted Sunday after President Donald Trump threatened tougher trade policy on unyielding partners.

The United States is insisting that all countries that have placed artificial Trade Barriers and Tariffs on goods going into their country, remove those Barriers & Tariffs or be met with more than Reciprocity by the U.S.A. Trade must be fair and no longer a one way street!

— Donald J. Trump (@realDonaldTrump) June 24, 2018

The Wall Street Journal then reported Trump would soon block more tech exports to China and prohibit Chinese companies from investing in U.S. technology. Chinese President Xi Jinping allegedly said Beijing would “punch back.”

An attempt at reassurance from Treasury Secretary Steven Mnuchin didn’t improve sentiment.

On behalf of @realDonaldTrump, the stories on investment restrictions in Bloomberg & WSJ are false, fake news. The leaker either doesn’t exist or know the subject very well. Statement will be out not specific to China, but to all countries that are trying to steal our technology.

— Steven Mnuchin (@stevenmnuchin1) June 25, 2018

Neither did confirmation from Peter Navarro, director of the National Trade Council, that the Administration has no plans to impose investment restrictions.

Navarro on Monday afternoon dismissed the market’s struggles as a product of momentum investing and advised that long-term investors will profit from the president’s trade strategies.

Why It’s Important

The markets have consistently closed lower on news of escalated trade tensions between the U.S. and its major trading partners, China, Canada, Mexico and the European Union.

American tariffs on foreign goods have threatened domestic supply chains and foreign manufacturing strategies for U.S. multinationals, and they’ve prompted retaliatory tariffs from trade partners expected to stunt international sales for U.S. companies.

What’s Next

Although the WSJ reported Trump’s new strikes against China will be announced by the end of the week, Navarro denied the allegedly impending event.

Instead, he said the Treasury Department will report to Trump on China trade issues Friday.

Related Links:

Trump's Trade Strategy: Pros And Cons

Analysts Weigh In On US-China Trade Developments

 

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