By CCN Markets: The Dow sputtered toward a dreadful showing on Wednesday as the stock market cooled off from a six-day feeding frenzy.
Meanwhile, major DJIA components Apple and Boeing remain trapped in the crosshairs of the US-China trade war, presenting the index with significant downside risk should there be any further escalation.
Dow Cools Off Following Parabolic Rally
All of Wall Street’s major indices traded down on Wednesday. By 11:11 am ET, the Dow Jones Industrial Average had seesawed its way to a 38.61 point or 0.15% loss; the pullback thrust the DJIA down to 26,009.9.
The S&P 500 slid 5.67 points or 0.2% to 2,880.05.
The Nasdaq underperformed with a 30.81 point or 0.39% loss that dropped the tech-heavy index to 7,791.98.
SCMP Report Reveals Dire Trade War Consequences
The market slammed the brakes on its unexpectedly-parabolic June rally, which had launched major stock indices back toward their all-time highs.
Unlike most mornings over the past month, Wall Street did not have to grapple with any new trade war escalation, either from a Communist Party editorial or President Trump's Twitter feed.
However, a concerning report in the South China Morning Post reveals just how severely blue-chip US companies have begun to suffer the effects of the US-China trade war.
Aerospace giant Boeing already faced a stormy forecast due to the simmering controversy over the embattled 737 MAX. Now, it’s struggling to close critical deals in China - including one for a near-record 100 jets - due to uncertainty about the future of Beijing-Washington relations.
“It’s nearly impossible for China to sign such a mega deal with Boeing when the two countries are in a trade war,” said one Chinese aviation industry insider. “From the demand side, China’s economic growth is slowing while competition in international flights is fierce, so there’s really no logic for Chinese airlines to buy a lot of new models.”
Ding Yifan, a senior researcher with Tsinghua University’s National Strategy Institute, told SCMP that the trade war risked permanently jeopardizing the ability of Dow staples like Boeing and Apple to operate in the world’s second-largest economy.
“Many US businesses are in danger of losing the China market for good,” Ding said. “In the worst case scenario, the US business presence will be uprooted in China – not because of China, but because of US policymakers.”
That’s particularly true of US tech companies.
Microsoft & Other Tech Giants Face Impossible Choice
If the Trump administration follows through on its threat to ban US companies from selling technology to Chinese firms like Huawei, tech giants like Microsoft could find themselves in an impossible position. Indeed, reports indicate that Beijing has already warned the Satya Nadella-led firm that it should not abide by that White House directive if it desires to succeed in the Chinese market.
According to Deutsche Bank, the Trump administration’s unconventional trade strategy has cost the US stock market $5 trillion. The suddenly-thorny business climate in China will only cause those losses to snowball - potentially for years - even if Washington and Beijing do return to the negotiating table in the near future.
Click here for a real-time Dow Jones Industrial Average price chart.