Dow Futures Sharp Decline Worryingly Signals Stock Market Bloodbath

The Dow is sweating as it approaches the December 15th deadline, snapping a 3-day winning streak. | Source: REUTERS/Brendan McDermid

• Dow Jones Industrial Average (DJIA) Futures are deep in the red Tuesday morning.
• The stock market might have a bad day once again as chances of a trade deal before Dec. 15 recede.
• President Trump could go ahead with the Dec. 15 tariffs.

Futures on the Dow Jones Industrial Average (DJIA) are deep in the red Tuesday morning as the stock market looks set for a second consecutive day of major losses. After Monday’s bloodbath that sent the Dow Jones below the 28,000-mark, investors should brace for a terrible time once again today as the tensions between U.S. and China on a trade deal continue to build up.

On Dec. 15, the U.S. is all set to impose tariffs on $160 billion worth of Chinese goods. This means that both Beijing and Washington are currently short on time to hammer out a solution within a matter of just days as the U.S. is currently busy signing a deal with Mexico. Clete Willems, former deputy director of the US National Economic Council, told South China Morning Post that:

I don’t expect a final deal by the 15th. There are still difficult things to work out and [Robert] Lighthizer is focused on the USMCA end game at the moment.

Similarly, Chinese government adviser Shi Yinhong has also hinted that a deal cannot be worked out within this week. He said:

A deal that is implementable must be concrete and detailed, which I don’t think can be concluded within days of December 15. China is unlikely to give a specific commitment on how much US agricultural products it would buy.

Dow futures tremble as the stock market downturn seems set to continue

Dow futures are down by 83 points, or 0.30 percent, at 5.56 am ET Tuesday to 27,819 points. That’s a slight recovery as Dow futures had dropped to 27,778 points at 4.46 am ET. It seems like the probability of the U.S. not imposing tariffs on China next week might have led to the turnaround.

S&P 500 futures are also down 0.26 percent, while Nasdaq Composite futures are down to the tune of 0.34 percent. All these numbers indicate that the stock market is not going to have a good day on Tuesday.

Trump could play hardball

Dow futures might have recovered slightly under the assumption that the U.S. might not impose tariffs this Sunday on China. But making such an assumption doesn’t look like a great idea as President Trump could play hardball with China in light of recent data points.

The U.S. reportedly raked in $7.2 billion worth of tariffs in October, the highest collection from import taxes in history. What’s more, tariff collections jumped by $1 billion from the prior-year period. The increased tariff collection can be attributed to the fresh round of tariffs Trump slapped on $111 billion worth of Chinese goods at the beginning of September.

So there’s not much reason for the U.S. to not slap tariffs in case a deal is not reached. If that’s indeed the case, then don’t be surprised to see the stock market and the Dow take a hammering. Trump would be unwilling to sign a deal that he might presume as a win for China, and Beijing has already said that it doesn’t want to commit to Trump’s demands.

Moreover, it looks like Beijing is already taking potshots at American technology companies as the Communist Party has issued a diktat to remove foreign hardware and software in use within the next three years.

Trump could get triggered by such a move as it has the potential to torpedo the U.S. stock market and the Dow by hurting big tech names. The stock market will be looking for concrete signs of development on the trade war front today and that will dictate the direction of the Dow Jones. But the initial signs are ominous and things are likely to turn ugly if Trump goes on yet another tirade against China.