Wednesday May 22nd

22-05-2019

Dow futures fall more than 100 points on more trade-war concerns, Qualcomm leads tech lower

U.S. stock index futures fell on Wednesday as trade worries increase while declines in Qualcomm and retailer shares dragged down market sentiment. At around 8:30 a.m. ET, Dow Jones Industrial Average futures were down 123 points, indicating a decline of 119 points at the open. Futures on the S&P 500 and Nasdaq 100 were also lower. The ongoing trade war — as well as restrictions on Chinese telecom giant Huawei — have led China to rethink its entire economic relationship with the U.S., according to a report from The South China Morning Post. The report said China is still open to restarting trade talks, but added that government advisors are highlighting the risks of sourcing supplies from the U.S. as the trade war drags on. President Donald Trump followed through with his threat to increase tariffs on $200 billion in Chinese goods from 10% to 25% earlier this month. China immediately responded by upping the tariffs on $60 billion of U.S. goods to as high as 25%. Treasury Secretary Steven Mnuchin told CNBC’s Ylan Mui on Wednesday that U.S. officials had yet to schedule talks in Beijing. Meanwhile, Qualcomm shares fell 11% in the premarket after a U.S. judge ruled the chipmaker violated antitrust law by unlawfully suppressing competition in the cellphone chip space. The news dragged down the VanEck Vectors Semiconductor ETF (SMH) down by 1.9%. Shares of Qualcomm have been under pressure all month, falling 9% in May. The U.S. recently added Chinese telecoms giant Huawei to a trade blacklist, which puts curbs on its ability to do business in America. However, some of those restrictions were eased on Monday. Relief over Washington’s relaxation of curbs against Huawei helped boost U.S. stocks in the previous session. “This will weaken the Huawei ban by US in our opinion and gives leverage to China in chip battle heading into G-20 talks,” Dan Ives, analyst at Wedbush Securities, said in an email referring to the ruling. “Qualcomm is dealt a blow with this FTC ruling as the main US 5G arms dealer, Huawei leverage is strengthened on 5G.” Retailers were also under pressure after the release of quarterly results from companies in the sector. Lowe’s fell more than 8% on weaker-than-expected earnings. Nordstrom, meanwhile, dropped nearly 11% as its quarterly earnings and revenue missed expectations. Target was the bright spot among retailers. The company’s stock rose more than 7% as its earnings and revenue topped analyst expectations. Same-store sales, a key metric for retailers, also surpassed estimates. Meanwhile, investors are likely to closely monitor the release of the U.S. central bank’s meeting minutes. The Federal Reserve is expected to provide insights into the May 1 meeting, when policymakers left interest rates unchanged and signaled little appetite to adjust them any time soon. Ahead of the minutes’ release, St. Louis Fed President James Bullard, a voting member of the central bank’s policymaking committee, said the Fed may have raised rates too much last year. “Rates are at a good place in the U.S. right now, if anything we are a little restrictive I would say,” he told Bloomberg News. “I am concerned we may have slightly overdone it with our December rate hike but I was pleased that the committee pivoted.” Markets in Asia were mixed on Wednesday as trade tensions continued to linger between the U.S. and China. Shares in mainland China edged down on the day, with the Shanghai composite declining 0.49% to 2,891.70 and the Shenzhen component lower by 0.51% to 9,041.22. The Shenzhen composite fell 0.506% to 1,540.85. Meanwhile, Hong Kong’s Hang Seng index rose about 0.2%, as of its final hour of trading. Elsewhere in the region, the Nikkei 225 in Japan rose fractionally to close at 21,283.37. The Topix, on the other hand, slipped 0.26% to end its trading day at 1,546.21. In South Korea, the Kospi recovered from its earlier slip to close 0.18% higher at 2,064.86. Oil prices fell on Wednesday after industry data showed an increase in U.S.crude inventories and as Saudi Arabia pledged to keep markets balanced. Brent crude futures were down 57 cents, or 0.8%, at $71.61 at barrel around 9 a.m. ET (1500 GMT). U.S. West Texas Intermediate (WTI) crude futures for July delivery were down 87 cents, or 1.4 percent, at $62.26. The June contract expired on Tuesday, settling at $62.99 a barrel, down 11 cents. Gold edged lower on Wednesday to hover near a two-week low, as a stronger dollar and signs of easing Sino-U.S. friction dented demand for bullion ahead of the minutes from U.S. Federal Reserve’s latest meeting. Spot gold edged down 0.1% to $1,273.47 per ounce at 0704 GMT. In the previous session, the metal fell to $1,268.97, its lowest since May 3. U.S. gold futures were unchanged at $1,273.20 an ounce.