[BRIEFING.COM] The S&P 500 had dropped as much as 1.5%, falling below its 50-day moving average (2859.77), as investors remained anxious about the prospects of a U.S.-China trade deal. Stocks had been coming off those lows and received a boost after President Trump recently told reporters that he has an "excellent alternative" to a trade deal. The S&P 500 is currently down 0.5%.
The Dow Jones Industrial Average is down 0.7%, the Nasdaq Composite is down 0.6%, and the Russell 2000 is down 0.5%.
President Trump fueled early trade angst after he told a rally of supporters yesterday that China "broke the deal," and he has no problem with following through with tariffs on China. The tariff rate on $200 billion of Chinese imports is set to increase to 25% tonight at 12:01 a.m. ET.
China's Vice Premier Liu He will partake in discussions in Washington today and tomorrow, but investors were resolute in de-risking. The prospect of an elongated trade battle contributed to steep losses in equities, a flight to safety in Treasuries, and some hedging activity.
President Trump has since tempered the pessimism in the market with his alternative-deal comments, lifting the S&P 500 back above its 50-day moving average. He added that he received a letter from President Xi and said he will probably speak to him on the phone soon.
The trade-sensitive materials (-0.9%), information technology (-0.7%), and industrial (-0.3%) sectors have recovered a bulk of their losses, and the CBOE Volatility Index (19.70, +0.30, +1.5%) has come well off its high of 23.38.
Lurking behind the trade headlines, meanwhile, is a bit of corporate news from the Dow components.
Walt Disney (DIS 134.03, -0.96, -0.7%) beat top and bottom-line estimates. Intel (INTC 47.11, -2.13, -4.3%) was downgraded to Market Perform from Outperform at BMO Capital Markets. Chevron (CVX 120.58, +3.11, +2.6%) decided to not provide a counteroffer to acquire Anadarko Petroleum (APC 73.50, -2.36, -3.1%).
Reviewing today's batch of economic data:
- The Producer Price Index for final demand increased 0.2% m/m in April, as expected, while the index for final demand, less food and energy ("core PPI"), increased 0.1% (Briefing.com consensus 0.2%). That left the yr/yr increases at 2.2% and 2.4%, respectively, unchanged from March.
- The key takeaway from the report is that it didn't show any acceleration in core producer inflation, which will keep the market's pass-through concerns for the consumer in check.
- Initial claims for the week ending May 4 decreased by 2,000 to 228,000 (Briefing.com consensus 220,000). Continuing claims for the week ending April 27 increased by 13,000 to 1.684 million.
- The key takeaway from the report is that the four-week moving average of 220,250 remains relatively close to a 50-year low, which implies there hasn't been any undue weakening in the labor market.
- The trade deficit was $50.0 billion in March (Briefing.com consensus -$51.2 bln), up from -$49.3 billion in February. Exports of $212.0 billion were $2.1 billion more than February exports. Imports of $262.0 billion were $2.8 billion more than February imports.
- The key takeaway from the report is that there hasn't been a meaningful improvement in the trade deficit despite efforts to reduce it with increased tariffs.
- Wholesale inventories declined 0.1% in March (Briefing.com consensus +0.1%) on top of an upwardly revised 0.4% increase (from 0.2%) in February. Wholesale sales jumped 2.3% following an unrevised 0.3% increase in February.
- The key takeaway from the report is that inventory growth continues to outpace sales growth on a year-over-year basis, which should help keep price pressures in check.