The Dow limped into the week’s penultimate trading session as a burst of conflicting trade war headlines paralyzed the market and left traders scrambling for answers.
Meanwhile, new economic data continued to suggest that the Federal Reserve will likely cut interest rates again this month.
Dow Stagnates as US & China Rekindle Trade Negotiations
Wall Street’s three major indices struggled to build on their previous-day recoveries. The Dow Jones Industrial Average declined 7.53 points or 0.03% to 26,338.48.
The S&P 500 edged 3.52 points or 0.1% higher to 2,919.75. Gains in energy (+0.38%) and financials (+0.37%) offset losses in utilities (-0.79%).
The Nasdaq ticked up 5.96 points or 0.08% to 7,909.7
Trade War Typhoon Drenches Market
The Dow and its peers entered the day little changed following a frenzied futures session.
DJIA futures plunged as much as 300 points after the South China Morning Post reported that Friday’s trade talks might be canceled, leaving only one day (Thursday) for top-level officials to negotiate.
Separately, CNBC reported that Friday’s agenda remained an “open question” and that even if the talks proceed for the previously-scheduled two days, Chinese Vice Premier Liu He – Beijing’s top negotiator – could depart early.
The White House quickly moved to refute the SCMP’s claims, with a spokesperson stating that the administration was “not aware of a change in the Vice Premier’s [Liu He] travel plans at this time.”
Dow futures completed their recovery after the New York Times and Bloomberg published reports indicating that the US is prepared to make concessions consistent with a limited trade deal.
According to the New York Times, the Trump administration could agree to ease off its blanket Huawei blacklist, allowing US companies to sell a limited range of components to the Chinese tech giant. The move follows the administration’s earlier decision to expand its trade blacklist to include several other Chinese tech unicorns.
Bloomberg News added that the White House might agree to suspend the scheduled Oct. 15 tariff increase in exchange for a currency pact that the two sides had discussed earlier in the year but shelved when negotiations broke down.
“If we can make a deal, we’re going to make a deal, there’s a really good chance,” Trump said on Wednesday. “In my opinion China wants to make a deal more than I do.”
Little hope remains that the US and China will strike a full trade deal before the Chinese delegation departs this weekend. However, a limited agreement that deescalates the simmering tariff war would provide the stock market with stability following several months of volatility.
Per the Wall Street Journal, Chinese officials hope to arrange a meeting between Vice Premier Liu He and President Trump that could lay the groundwork for continued discussions between Trump and Chinese President Xi Jinping at a summit next month in Chile.
CPI Stagnates, Bolstering Interest Rate Cut Odds
On the domestic front, consumer prices remained unchanged in September, printing their weakest reading since January as the US economy’s expansion slogs through its 11th year. Core CPI edged 0.1% higher, snapping a streak of three straight months at 0.3%.
The weak reading bolstered expectations that the Federal Reserve will implement a third straight interest rate cut later this month. According to CME’s FedWatch Tool, fed funds futures imply an 85% probability of a 25 basis point cut that would reduce the Fed’s target range to 1.5% to 1.75%.