Thursday May 9th

9-05-2019

Dow futures drop 200 points after Trump says China 'broke the deal,' fueling trade war worries

U.S. stock index futures were lower on Thursday morning after President Donald Trump said China "broke the deal" at a rally Wednesday evening, fueling worries the U.S. and China will be unable to hatch a trade agreement before new tariffs go into effect at midnight. Futures on the Dow Jones Industrial Average fell about 203 points, indicating a negative open of more than 118 points. The S&P 500 and Nasdaq were also set to open lower. The Dow is down about 540 points and the S&P 500 has lost more than 2% this week after Trump threatened to raise tariffs on more Chinese goods over the weekend. Shares of Intel fell another 3% in premarket on Thursday after sinking nearly 5% in the previous session as the chipmaker said it sees both revenue and earnings per share growing in the "single digit" percentage range over the next three years. BMO downgraded the stock to market perform from outperform on Thursday, saying it sees the stock "treading water at best." "By the way, you see the tariffs we're doing? Because they broke the deal. They broke the deal," Trump said at a rally in Florida Wednesday evening. "So they're flying in, the vice premier tomorrow is flying in — good man — but they broke the deal. They can't do that, so they'll be paying." China claimed it will retaliate if the higher levies are imposed. However, the Chinese delegation is still in Washington this week to negotiate a deal. Despite Trump's amped-up rhetoric, the White House claimed on Wednesday China still wants to make a deal, which kept the market temporary afloat. Thursday is "a pivotal day," said Ed Mills, public policy analyst at Raymond James, in a note. "We believe Chinese officials will be looking to delay Friday's tariff increase in order to continue conversations as to the appropriate level of commitments in key areas. However, the market reaction over the last couple days gives Trump some leeway to maintain an aggressive tone." Chevron's stock rose more than 3% after the company said it will not submit a new offer to acquire Anadarko Petroleum. Chevron will collect a $1 billion breakup fee and increase buybacks. In terms of earnings, Softbank, Norwegian Cruise Line, Booking Holdings, Dropbox, and News Corp. will be updating investors throughout the day. The number of Americans filing applications for unemployment benefits fell less than expected last week, which could raise concerns that the robust labor market was losing some momentum. Initial claims for state unemployment benefits decreased 2,000 to a seasonally adjusted 228,000 for the week ended May 4, the Labor Department said on Thursday. Data for the prior week was unrevised. Stocks in Asia declined on Thursday as investors remained cautious after U.S. President Donald Trump claimed China "broke the deal" in the ongoing trade negotiations. South Korea's Kospi tumbled 3.04% to close at 2,102.01 — its biggest one day percentage loss since mid-October 2018, according to Reuters. In China, the Shanghai composite declined 1.48% to close at about 2,850.95 and the Shenzhen component declined 1.39% to finish its trading day at 8,877.31. The Shenzhen composite fell 1.28% to close at approximately 1,510.72. Hong Kong's Hang Seng index was down more than 2, as of its final hour of trading. Japan's Nikkei 225 slipped 0.93% to close at 21,402.13, while the Topix index slipped 1.38% to finish its trading day at 1,550.71. Oil prices steadied on Thursday as an escalating trade battle between the United States and China counteracted upward pressure from a surprise decline in U.S. crude inventories. Heightened tensions between the world's two biggest economies have clouded the outlook for global growth, which influences oil demand expectations. Global equity marketswere also hit. Brent crude oil futures were down 3 cents at $70.34 a barrel by 7:12 a.m. ET (1112 GMT), heading for their second consecutive weekly loss. Earlier in the session they fell as low as $69.57 a barrel. U.S. West Texas Intermediate crude futures were at $61.43 per barrel, down 69 cents and set for a third week of losses. Gold prices gained on Thursday as a spike in trade tensions between the United States and China renewed fears of a global economic slowdown and forced investors to seek lower-risk assets. Spot gold edged up 0.3 percent to $1,284.32 per ounce, having climbed to its highest since April 15 at $1,291.39 on Wednesday. U.S. gold futures were also 0.3 percent higher, at $1,285.20 an ounce.