The Dow is uncomfortably timid heading into the week’s penultimate trading session, as the US stock market digests comments from former White House economic advisor Gary Cohn that paint a picture of a “chaotic” Trump administration.
As of 10:04 am ET, the Dow Jones Industrial Average had lost 30.39 points or 0.12 percent. The S&P 500 and Nasdaq also traded in the red, dropping 0.14 percent and 0.08 percent, respectively.
Dow futures had spiked toward 25,800 earlier in the morning, only to drop back below 25,675 before reversing course once more to end the pre-market session in neutral territory.
On Wednesday, the Dow raced to a 148.23 point or 0.58 percent gain, closing less than 300 points below 26,000. The S&P 500 surge 19.4 points or 0.69 percent to not only close comfortably above 2,800 but also to end the session at a four-month high. The Nasdaq also reached a new peak during the 2019 US stock market recovery, gaining 52.37 points or 0.69 percent to close at 7,643.4.
A Dismal GE earnings forecast, rumors of a criminal probe into Facebook, and more bearish economic data from China all weighed on US stock futures on Thursday morning, but Wall Street should weigh recent comments from former Trump advisor Gary Cohn carefully as it continues to breathlessly wait for the president to sign a new trade deal with China.
Speaking during an interview on the Freakonomics Radio show, Cohn – who was an executive at Goldman Sachs prior to becoming US President Donald Trump’s first director of the National Economic Council – criticized the administration’s trade war with China, pulling no punches in arguing that it hurt both the US economy and American workers.
“Tariffs don’t work. If anything, they hurt the economy because if you’re a typical American worker, you have a finite amount of income to spend. If you have to spend more on the necessity products that you need to live, you have less to spend on the services that you want to buy. And you definitely don’t have anything left over to save.”
Alleging that Trump is “desperate right now” to strike a new US-China trade deal, Cohn appeared to confirm reports that the president allows the stock market’s day-to-day movements dictate his policy choices and especially desires to make every effort to boost the Dow ahead of his 2020 reelection campaign.
“The president needs a win. The only big open issue right now that he could claim as a big win that he’d hope would have a big impact on the stock market would be a Chinese resolution. Getting the trade deficit down I will never say is easy, but of the issues on the table, that’s relatively easier. Getting the intellectual property, the forced technology transfer and the market access — much more difficult.”
Analysts predict that a trade deal could kick the stock market’s recovery back into high gear, but Wall Street won’t be comforted by Cohn’s description of a “chaotic” White House in which Trump administration officials regularly ignore procedure and instead operate unilaterally. That, he said, drove him to tender his resignation.
“What happened in the White House is we got to a point, unfortunately, where one or two people decided that they were going to no longer be part of a process and a debate,” he said, referring to Trump advisors Peter Navarro and Wilbur Ross. “When the process breaks down, then you’re, sort of, in my mind, living in chaos. I don’t want to live in a chaotic organization.”
Perhaps unfortunately for investors, the same “chaotic organization” that drove the US into the trade war is also tasked with bringing it to an end.
And according to Bloomberg, the Trump Administration plans to let China keep kicking that can down the road.
Last modified: July 2, 2020 8:14 PM UTC