- The Dow is tracking sideways as Trump’s scheduled tariffs threaten to derail the stock market.
- Larry Kudlow opted to walk back talk of a delay on Tuesday, reigniting fears of a trade war escalation.
- Apple (AAPL) stock’s moderate rally helped to cushion the Dow Jones as Boeing (BA) slid for the second straight day.
The Dow Jones was trapped in a sideways trajectory Tuesday as the fog of the US-China trade war hung heavy over markets.
With the jobs report out of the way and the Federal Reserve expected to maintain the status quo, the Dow is desperately waiting for confirmation on the state of December’s planned tariffs.
Larry Kudlow walked back talk of delaying December’s tariffs today, contradicting earlier reports that a delay is the most likely outcome.
Dow Jones Unmoved After Trump Official Keeps December Tariffs on the Table
On another tight day of trading, the Dow Jones Industrial Average tracked closely with Wall Street’s other two major stock indices. Minutes before the closing bell, the Dow had gained 7.1 points or 0.03% to climb to 27,916.70.
The S&P 500 was virtually unchanged at 3,135.74, while the Nasdaq rose 0.05% to 8,626.49.
Politics Dominate Short Term Dow-Outlook
Politics are front and center for financial markets this week. The UK’s general election is on tap for Thursday, negotiations are almost finalized for the USMCA, and US-China trade talks are going down to the wire before Sunday’s anticipated tariffs go into effect. While all these can certainly have an impact on the Dow, it is the upcoming tariffs that are the grade-A event risk.
One of Trump’s chief economic advisers, Larry Kudlow, refused to rule out any eventualities, assuring investors that December’s import duty hikes remain on the table, even as several news outlets reported a delay a few hours earlier.
Impeachment articles were introduced today, having no impact on the Dow Jones, even as Democrats opted for a narrower-than-expected (just abuse of power and obstruction of Congress) angle of attack on Trump.
The FOMC board meets on Wednesday to decide on interest rates, with markets unanimously expecting Jerome Powell to keep interest rates on hold.
Dow bulls are well priced for a cautious but optimistic Federal Reserve, though recent jobs data have slightly raised the risk of a “less dovish” statement from the Fed Chair on Wednesday, even if it’s very unlikely to border on hawkish.
Stock Market at Risk as Manufacturing Weakness Leaks into Growth Forecasts
After last week’s bumper jobs data, it is difficult to be anything other than optimistic about the state of the US economy. However, macro data continues to diverge among the different sectors, and it remains to be seen how resilient the stock market can be if the slower portions of the economy start dragging on the more vibrant ones.
Bill Diviney, senior economist at ABN AMRO, is forecasting significantly weaker growth in the United States next year, primarily based on this reasoning. He sees the cracks in manufacturing starting to weaken the mighty US retail machine, writing today,
Macro data in the US since the last [FOMC] meeting has been mixed; while the jobs data last Friday were strong, the manufacturing sector remains very weak according to the ISM survey, and falling imports suggest softening domestic demand.
Moreover, weakness in manufacturing seems to be spilling over to the services sector, according to the non-manufacturing ISM survey. Ultimately, this should dampen consumer spending going into the new year, and our 2020 growth forecast is well below the Fed’s, at 1.3% versus 2.0%.
Dow 30: Apple Rises on Hopes of Trade Delay
It was another cautious day for the Dow 30 as the plethora of contradictory headlines provided only minor insight into the actual state of trade talks between the US and China.
Boeing (BA) stock fell once again, though only 0.65% as investors look spooked by the prospect of a “whistleblower”-type testimony from a Boeing employee who warned of safety concerns. It was not all bad for the Dow Jones’ most heavily weighted member, as news also broke that Boeing received their first new orders of 2019 for the grounded 737 MAX aircraft.
It doesn’t take much to get Apple (AAPL) stock rising these days, and it was leading the Dow on Tuesday with a 0.88% rally. Talk of a tariff delay is the most obvious catalyst for this move, though with a roughly 70% rally this year, it is impossible to rule out pure momentum in the dominant tech giant’s stock.
Exxon Mobil was one of the worst-performing stocks in the index, losing more than 0.85% even as the oil giant won its much-publicized climate change case in New York.