Stocks derailed after promising start
US: S&P 500 Index +0.1%, Dow +0.2%, Nasdaq +0.5%
Europe: STOXX Europe 600 -0.5%, German DAX -2.5% France CAC 40 -1.2%, U.K. FTSE 100 +0.7%
Asia: Japan Nikkei -2.2%, China Shanghai Composite closed, Korea KOSPI -1.2%
Rates/Commodities: 10-Year Treasury yield -7 basis points to 2.63%, WTI crude oil -4.7%, COMEX gold: -0.2%
Trade talk comments from President Trump helped spur a selloff that left U.S. equities near flat on the week.
Stocks gained on Monday and Tuesday as investors continued to ride the tailwind provided by Federal Reserve Chair Jerome Powell in last week’s market-friendly press conference. The corporate earnings calendar was largely devoid of potentially market-moving names, and more than two-thirds of S&P 500 Index firms that had reported through Wednesday had topped analysts’ expectations, keeping earnings on track for a fifth straight quarter of double-digit growth.
The strong start to the week was abruptly halted on Thursday after Trump indicated he does not plan to meet Chinese President Xi Jinping ahead of the March 1 deadline when tariffs on $200 billion of Chinese goods are set to rise from 10% to 25%. “Though Presidents Trump and Xi are still expected to meet at some point, investors were rattled by the implication that a deal may be further out than what was previously thought,” said LPL Research Chief Investment Strategist John Lynch. “We expect the U.S. and China to reach a resolution soon, removing a headwind that has weighed on financial markets and overall sentiment.” Consequently, early-week gains slipped away, leaving major U.S. indexes in the red and Treasury yields lower—the benchmark 10-year note shed seven basis points—as investors moved money to the sidelines. Elsewhere, gold recovered mid-week losses to finish near flat, and oil leaked roughly 5% and weighed on the broader commodity space.
Overseas, stocks’ performance followed a similar pattern, though the drivers were different. Upbeat corporate earnings propelled the STOXX Europe 600’s early week gains, but stocks then sold off amid more disappointing economic data, particularly out of Germany, that led the European Commission to slash its growth forecasts for both the Eurozone and the broader European Union. In Asia, exchanges in mainland China were closed all week for the lunar New Year, while Japanese stocks succumbed to selling pressure in Friday’s session after holding up most of the week.
Another busy week of earnings lies ahead with 70 S&P 500 companies on the schedule. Sentiment gauges headline the U.S. economic docket as both the NFIB Small Business Optimism Index and University of Michigan Sentiment Index will be released. Abroad, gross domestic product reports are slated for the UK, Germany, Japan and the composite Eurozone, while import and export data from China will garner attention amid ongoing trade negotiations. Track these and other important events on our Weekly Global Economic & Policy Calendar.
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