Dow Shudders as Iran Threatens Trump with ‘Historic Nightmare’

Iran threats destabilized the Dow Jones on Tuesday, while strong trade balance data suggested Trump is winning the trade war.
  • Iranian threats returned to destabilize the stock market on Tuesday.
  • A rough day for the Dow Jones was tempered by a sharp move higher in Boeing.
  • Encouraging trade balance data suggested Donald’s Trump’s trade war with China is working, but Dow bulls may have to endure more tariffs in 2020.

The Dow Jones suffered a triple-digit loss on Tuesday. Stocks slipped in the wake of Iran threatening that it had 13 ways to inflict a“historic nightmare” on the United States in response to the killing of Qasem Soleimani.

It could have been a lot worse for the Dow 30, had Boeing not posted an impressive rally.

Dow Jones Wobbles After Iran’s Rhetoric Intensifies

Among the three major stock market indices, the Dow Jones Industrial Average was the laggard.

The Dow dropped 100 points on Tuesday as Iran intensified its rhetoric against the US. | Source: Yahoo Finance

The Dow fell 105.73 points or 0.37% to 28,597.65. The Nasdaq crept 0.06% into the green, while the S&P 500 recorded a 0.23% loss.

Once again, there was plenty of volatility in the commodity sector, and crude oil (-0.95%) continued to fall from its recent peak.

The price of gold extended its impressive climb with a 0.25% rally.

Digital asset bitcoin is also on the march higher, as a 7% rally carried it past the $8,000 handle.

Stock Market May Have to Deal With Another Trade War in 2020

Focus on geopolitical tensions has pushed the US-China trade war to the back of most people’s minds.

Still, today’s economic data show that Dow bulls cannot afford to ignore the politically sensitive US trade balance. Today’s reading shows a significant contraction, suggesting that Donald Trump’s efforts to narrow the deficit with China are paying dividends.

Trump has successfully narrowed the US-China trade deficit. | Source: Think ING

Unfortunately, this is not all good news for the Dow Jones, as ING economist James Knightley outlined in a recent report.

Other countries are substituting for the reduced imports from China, suggesting that Trump will have to double-down with other trade wars, as Knightley states:

Looking geographically, the numbers suggest that President Trump’s tough stance with China has paid dividends…

However, we continue to see a significant amount of substitution (although not be as much as the deficit with China has shrunk) given the US deficits with both Mexico and the EU will hit new all-time highs – the deficit with the EU is on course to increase by US$8bn while the deficit with Mexico is set to increase by US$21bn.

Consequently, the EU is likely to remain nervous that President Trump could focus more of his attention on perceived European trade indiscretions in 2020.

Should the US president pursue a trade war with Europe, it seems likely that markets would react cautiously, as they did when Trump first implemented his tariffs on China.

But given that the White House can now argue their tactics are working, Wall Street might be more willing to give them the benefit of the doubt.

Dow Stocks: Boeing Rally Limits the Strain

It could have been a very rough day for the Dow 30, as sizable losses in key stocks weighed on the index.

Bucking a recent trend, the Dow Jones’ most crucial stock – Boeing (NYSE: BA) – posted an impressive 1% rally. This helped keep losses subdued.

Disney (NYSE: DIS) was back on track with a 0.12% gain after struggling to start the week.

Most of the damage was due to large losses in oil giants Exxon Mobil (NYSE: XOM) and Chevron (NYSE: CVX), which plunged around 1.5% on the day. Chevron was the worst hit, after chaos in the Middle East forced them to move employees out of an increasingly unstable situation in Iraq.

Apple (NASDAQ: AAPL) was very quiet, sliding gently below $300 but seeing no ill effects from Ricky Gervais’ viral comments about the company’s supply chain at the Golden Globes.

Josiah Wilmoth edited this article for CCN.com. If you see a breach of our Code of Ethics or Rights and Duties of the Editor or find a factual, spelling, or grammar error, please contact us.

Last modified: February 5, 2020 9:13 PM UTC

Published:
January 7, 2020 8:07 PM UTC
Posted in: Markets
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Francois Aure @bullishtulips

Financial speculator & author living in the hills in Los Angeles. J.D. but very much not a lawyer. Favorite trading books are anything written by Jack Schwager. | Follow Me On Twitter | Email Me | Article Compilation On Muck Rack | My Website