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Dow Futures Inch Higher but Trade War Threatens Anxious Stock Market

Last Updated September 23, 2020 1:17 PM
Harsh Chauhan
Last Updated September 23, 2020 1:17 PM
  • Dow Jones Industrial Average futures are trading up early Friday.
  • The stock market continues to look for direction amid a protracted trade war.
  • Unfavorable developments on the trade war front could send the market into the fourth day of losses.

Futures on the Dow Jones Industrial Average (DJIA) are trading higher early Friday despite the growing uncertainty around a potential trade deal between the U.S. and China. The stock market was left in limbo yesterday and finished lower for the third consecutive day as it looks for concrete signs of a resolution to the trade war saga.

The higher Dow futures indicate that the stock market might bring an end to its three-day losing streak. However, recent comments from both Beijing and Washington indicate that a higher open could soon give way to despair if both sides keep exchanging barbs. So there’s a chance that the stock market’s losing streak might extend into the fourth day.

Dow futures indicate a higher stock market open

Dow Jones futures are up 49 points, or 0.18 percent, to 27,797 points at 5.37 am ET. The futures were trading as high as 27,839 points at 3.50 am ET before witnessing a sharp pullback. This gives us an idea of the potential volatility the stock market might witness today if no favorable development takes place on the trade deal front.

Chart showing Dow Jones futures.
Dow Jones Industrial Average (DJIA) futures show that the stock market might have a volatile day ahead. | Source: Yahoo! Finance

Futures on the S&P 500 are up 0.18 percent, while Nasdaq Composite futures are also up 0.28 percent.

Is another day of losses for the stock market in the cards?

Sparks are flying between the U.S. and China once again. Both countries are negotiating hard at the table and it looks like none of them are willing to concede an inch of ground to the other. Chinese President Xi Jinping has already expressed in no uncertain terms that Beijing isn’t afraid of backing down.

On the other hand, the U.S. Chamber of Commerce senior executive Myron Brilliant has dropped a hint that a trade deal might not get into place soon. Brilliant told CNBC :

“I explained to (Liu He), ‘you’re going to have to have some give-and-take here.’ China has to bring more to the table in the final package,” said Brilliant told CNBC’s “Squawk Box” on Friday.

“But we’re not going to see an elimination of all the tariffs after phase one.”

We’re going to have just a few weeks now and I’m not sure we’re going to get a deal done by Dec. 15.”

This indicates that the U.S. is all set to impose tariffs on $160 billion worth of goods from Dec. 15. That’s bad news for Dow component Apple, as the iPhone will now fall under the ambit of tariffs imposed by Trump on Chinese imports.

So, the Dow Jones could end the week on a bad note if there’s no clarity about a deal, though that’s not the only uncertainty the stock market faces today. The University of Michigan will release consumer sentiment reading before the market opens today .

November’s reading is expected to remain consistent with last month’s reading of 95.7.

Any slip on this front could send the Dow into a tailspin, especially considering that the chances of a recession still remain high. Positive consumer sentiment numbers will definitely have a positive bearing on the Dow Jones and the stock market today. However, the fate of a U.S.-China trade deal will play a bigger role in determining if the Dow snaps out of its losing streak.