dowoct8-300x145 Market Snapshot - Tuesday 10.08.19

US Indices underwent a steep decline on Tuesday as hopes surrounding the US-China trade talks all but disappeared.

 

Washington’s trade blacklist expanded to include a number of Chinese AI companies, stating Beijing’s treatment of Muslim ethinic minorities as one factor contributing to this decision.

 

China’s response–”stay tuned”–promised retaliatory measures against the US’ blacklist expansion.

 

Although US-China talks are set to resume on Thursday, China has dampened outcome expectations according to the South China Morning Post. But China’s national media source–Global Times–states a more upbeat tone regarding this week’s talks. Hence, there is a bit of confusion with regard to the messaging in the mainland.

 

Currently, President Trump is levying a $250 billion tariff on Chinese goods set to take place on October 15 should nothing fruitful come about in the upcoming trade negotiations.

 

Amid the trade backdrop, markets have been expecting the Federal Reserve to continue its program of rate cuts. Fed chair Jerome Powell satisfied investor expectations somewhat by stating that the central bank is looking forward to expanding its balance sheet soon. This statement provided a little support for the markets on Tuesday.

 

However, Powell also made it clear that the Fed’s balance sheet expansion is not to be viewed as a restart of quantitative easing but rather an accommodative increase.

In other news, US producer prices in September have logged their largest 8-month drop. With prices of goods and services lower, indicating no uptick in inflation, this drop in prices can give the Federal Reserve room for further rate cuts.

 

By the end of the day, the Dow had fallen 313.98 points (-1.2%), the S&P 500 was down by -1.6%, and the Nasdaq slid -1.7%.

 

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