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Dow Futures Tread Cautiously As Trade Deal Hype Dies Down

Harsh Chauhan
Last Updated September 23, 2020 1:16 PM
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  • Dow Jones Industrial Average futures point toward an uncertain day for the stock market today.
  • The U.S.-China trade deal hype is now in the rear-view mirror as consumer sentiment data will now come into focus.
  • China’s export numbers will give investors some reason to cheer today.

Dow Jones Industrial Average (DJIA) futures are swimming cautiously Friday as yesterday’s trade deal-fueled optimism takes a back seat. The Dow and the stock market roared higher Thursday after it emerged that tariff war between the U.S. and China could come to an end if the phase one deal is signed between the two countries.

However, the euphoria has been tempered by the possibility that the U.S. and China might not end up striking a trade deal due to a few complications. For instance, President Trump might not be willing to provide the concessions that the Chinese are reportedly demanding. Meanwhile, there are concerns that China could become difficult to deal with if Trump removes the tariffs in a limited trade deal, scuppering the chances of moving toward the next phase of negotiations.

Dow futures in the red after yesterday’s euphoria

Futures on the Dow Jones Industrial Average are down 7 points, or 0.03 percent, at 5.48 am ET. The index had closed Thursday at 27,674.80 points, gaining 182 points yesterday, but it began Friday on the backfoot. Dow futures were languishing at 27,609 points at 1.38 am ET before recovering to some extent, pointing toward a tentative day for the stock market.

Chart showing Dow Jones futures.
Dow Jones Industrial Average futures point toward a tentative day for the stock market. | Source: Yahoo! Finance

S&P futures and Nasdaq Composite futures are also down by 0.11 percent and 0.17 percent, respectively, indicating the cautious mood of the stock market.

What’s going to drive the stock market today?

The signing of a potential trade deal between the U.S. and China has given the stock market a much-needed shot in the arm, but one shouldn’t forget that nothing has been formalized just yet. As such, the Dow and the stock market will have to look for new catalysts to end the week on a high.

Consumer sentiment figures that are due out at 10 am ET could be critical in determining the direction of the Dow and the stock market today. October consumer sentiment reading had jumped to a three-month high of 95.5 from a reading of 93.2 in September , according to the University of Michigan. That reading was well ahead of the 92.5 that economists were expecting.

A poll of economists conducted by the Dow Jones estimates that the preliminary figures for November will come in at 95, slightly lower than last month . But if the reading turns out to be better than expectations on account of the trade deal optimism, the Dow and the stock market could end up having a good day.

Meanwhile, there’s a bit of good news on the macroeconomic front as well for the Dow and the stock market to build upon. Reuters reports that China’s October exports fell less-than-anticipated in October. Though down for the third consecutive month , exports from China last month fell just 0.9 percent year over year.

That should bring a sigh of relief to the Chinese economy as the September contraction was way bigger at 3.2 percent. According to Martin Rasmussen, an analyst economist at Capital Economics, the improvement in Chinese exports was the result of improved demand from the U.S.

This piece of data could drive the feel-good factor prevailing in the stock market since yesterday and drive the Dow higher Friday. On the earnings front, Duke Energy, Honda, and Allianz are set to release their reports today.