Stocks Lose Gains as Geopolitical Tensions Linger
11 December 2018 - 9:10PM
Dow Jones News
David Hodari and Akane Otani
U.S. stocks rose Tuesday in another rocky session as investors
weighed signs of progress in trade talks against broader concerns
about slowing growth.
The Dow Jones Industrial Average climbed as much as 368 points
in the opening minutes of trading after President Trump said on
Twitter that "very productive conversations" were happening around
trade. Shares of auto makers also rose after China agreed to reduce
tariffs on U.S. cars to 15%, down from the current 40%.
But typical of the volatile trading environment of the past two
months, stocks couldn't hold on to the gains and turned lower by
midday, with the blue-chip index slumping as much as 202 points.
The reversal started shortly after Mr. Trump sparred with top
Democrats, threatening to shut down the government if Congress
didn't fund construction of his proposed border wall.
Stocks then extended the rally heading into the final hour of
the trading day, with the Dow industrials, S&P 500 and Nasdaq
Composite all notching gains. The 30-stock index climbed 112
points, or 0.5%, to 24536. The S&P 500 added 0.6% and the
tech-heavy Nasdaq advanced 0.7%.
Analysts cautioned that the volatility that has taken a hold of
the stock market in recent weeks could extend into the end of the
year. Investors are grappling with a range of worries that they
worry could disrupt the long U.S. stock rally, including flaring
geopolitical tensions and signs of slowing growth. BlackRock
cautioned in its annual investment outlook that negative returns
across both stocks and bonds -- a relatively rare phenomenon --
could become more common as the bull market ages.
"The fragility of the market stems from the awareness that 2019
will not look anything like 2018 in terms of earnings and economic
growth," said Art Hogan, chief market strategist at B. Riley
Financial. "Investors are getting used to this idea that this could
be as good as it gets."
Companies that have become barometers for investors' sentiment
around trade talks rose, with Caterpillar and Deere adding about
0.6% apiece.
Apple shares missed out on broader stock gains, though, losing
0.5% as the company tried to get a Chinese court to reconsider its
decision to ban sales of older iPhones in China.
The court ruling added another source of friction in the trade
skirmish between the world's two largest economies, as did the
recent arrest in Canada of a top executive at Chinese firm Huawei
Technologies.
Elsewhere, the Stoxx Europe 600 rose 1.5%, reversing course
after U.K. Prime Minister Theresa May's postponement of a crucial
Brexit vote in Parliament Monday sent shares sliding. Ms. May's
shock decision to pull the vote further diminished many investors'
willingness to bet on U.K. assets, some said.
"If you're a macro investor, you're going to get blown out of
the water by events like yesterday's," said John Wraith, head of
U.K. rates strategy at UBS. "It makes investors incapable of
trading those markets with any conviction whatsoever, so you see a
lot of fund managers staying neutral and keeping their exposure to
a minimum."
Shares in Asia were mixed, with India's Nifty 50 index slumping
1.9% after the governor of its central bank unexpectedly resigned
from his post.
Central banking policy was also a subject of focus in the U.S.,
where data showed producer prices -- another gauge of inflation --
rising for the third consecutive month.
Investors and analysts widely expect the Federal Reserve to
raise short-term interest rates when it meets next week, with CME
Group data suggesting the market is pricing in a 78% probability of
a rate increase.
Any forward guidance out of the Fed will be closely scrutinized,
especially since some investors believe Chairman Jerome Powell has
conveyed mixed messages over recent months. Mr. Powell jolted
markets after suggesting rates weren't close to neutral and then
subsequently appearing to backtrack on those remarks.
"I think he got a bit ahead of himself saying that we're not
close to neutral," said Mark Heppenstall, chief investment officer
at Penn Mutual Asset Management. "I think that was language we
weren't prepared for and it helped tip the market. Now I think
you'll see his language more focused on gradual patience."
Write to David Hodari at David.Hodari@dowjones.com and Akane
Otani at akane.otani@wsj.com
(END) Dow Jones Newswires
December 11, 2018 15:55 ET (20:55 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.