By Chris Matthews and Mark DeCambre, MarketWatch
Powell sees 'further evidence of a global slowdown'
The U.S.-China trade war overshadowed remarks by Federal Reserve
Chairman Jerome Powell on Friday after President Donald Trump said
he's "ordering" companies to start looking for "an alternative to
China" and indicated he was preparing additional measures after
Beijing imposed more retaliatory tariffs on imports of U.S.
goods.
Stocks slumped, posting heavy losses led by trade-sensitive
sectors. Earlier, the major indexes flipped between modest gains
and losses after Federal Reserve Chairman Jerome Powell left the
door open for another interest rate cut in September in a speech in
Jackson Hole, Wyoming.
How are the major benchmarks faring?
The Dow Jones Industrial Average fell 303 points, or 1.2%, to
25,950, while the S&P 500 index dropped 35 points, or 1.2%, to
2,888. The Nasdaq Composite index shed 113 points, or 1.4%, to
7,879.
On Thursday, the The Dow rose 49.51 points or 0.2%, at
26,252.24, powered in large part by 4.2% gain in shares of Boeing
Co.(BA). Meanwhile, the S&P 500 slipped 1.48 points, or less
than 0.1%, to 2,922.95, while the Nasdaq Composite Index gave up
28.82 points to 7,991.38, a decline of 0.4%.
For the week, the Dow on track for a 0.2% rise, while the
S&P 500 was near unchanged. The Nasdaq is on pace to end the
week 0.1% lower.
Read:Stocks say the consumer isn't as strong as government data
suggests
(http://www.marketwatch.com/story/stocks-say-the-consumer-isnt-as-strong-as-government-data-suggests-2019-08-21)
What's driving the market?
Ahead of Friday's open, China announced new tariffs
(http://gss.mof.gov.cn/zhengwuxinxi/gongzuodongtai/201908/t20190823_3372938.html)
of 5% and 10% on $75 billion in U.S. imports, set to go into effect
in two tranches, on Sept. 1 and Dec. 15, respectively. The tariffs
will be imposed on agricultural products, crude oil, small aircraft
and cars among other goods. The Chinese government said that the
move was in response to the Trump Administration's plans to
institute 10% tariffs on $300 billion in Chinese imports, also in
two stages and on the same dates, announced earlier in August.
See:Escalation in U.S.-China trade war threatens global economy,
poses Trump re-election risk
(http://www.marketwatch.com/story/escalation-in-us-china-trade-war-threatens-global-economy-poses-trump-reelection-risk-2019-08-23)
The move drew a furious response from Trump, who tweeted that he
had "hereby ordered" U.S. companies "to immediately start looking
for an alternative to China." Trump also blasted Powell for
apparently not sounding a more dovish tone in his Jackson Hole
speech:
(https://twitter.com/realDonaldTrump/status/1164914610836783104)
In the speech, Powell left the door open for another interest
rate cut at the central bank's next meeting Sept. 17-18, saying,
"We have seen further evidence of a global slowdown," since the
Fed's last meeting in July.
At the same time, he said "the U.S. economy has continued to
perform well overall" while " inflation seems to be moving closer
to 2%," the Fed's goal for annual inflation. Low inflation was a
main justification for cutting rates last month.
"It's not too surprising that he was vague, and intentionally
so," said Randy Frederick, vice president of active trading
strategies and derivatives at Charles Schwab. "He wants to be
nimble and he doesn't want the market to move on what he said."
Fed funds futures markets indicate investors see the speech as
mildly dovish. Prior to the speech, the market was pricing a 95.8%
chance of one rate cut and a 4.2% chance of no cut. After the
speech, the probability of at least a 25 basis-point cut rose to
100%, with the market showing a 5% chance of a 50 basis-point
cut.
Prior to Powell's speech, interviews of Fed officials including
St. Louis Fed President James Bullard, Dallas Fed President Robert
Kaplan, Kansas City Fed President Esther George and Philadelphia
Fed President Patrick Harker indicated that FOMC board members have
a wide range of views on the topic. Bullard, for instance argued
for further rate cuts, while George and Harker argued against.
On the data the data front, new home sales in July fell 12.8% to
an annual rate of 635,000 homes, below the median forecast of
650,000, according to a MarketWatch poll of economists.
Which stocks are in focus?
Shares of Foot Locker Inc. (FL) tumbled 14%, after the retailer
reported second-quarter sales and profits
(http://www.marketwatch.com/story/foot-locker-shares-plummet-after-earnings-and-sales-miss-2019-08-23)
that missed Wall Street expectations.
HP Inc. (HPQ) shares fell more than 5%, after the PC and printer
manufacturer announced a Enrique Lores would assume the CEO role
effective Nov. 1, along with third-quarter results that matched
analyst expectations.
Salesforce.com Inc. (CRM) reported quarterly financial results
(http://www.marketwatch.com/story/salesforce-stock-surges-as-results-outlook-top-street-estimates-2019-08-22)
late Thursday, showing revenue growth and earnings-per-share that
beat Wall Street forecasts. The company's stock rose 4.4%.
Shares of Intuit Inc. (INTU) rose 5.4%, following a release of
better-than-expected fiscal fourth-quarter results
(http://www.marketwatch.com/story/turbotax-parent-intuit-stock-gains-5-after-q4-results-2019-08-22)
Thursday evening.
Hasbro Inc. (HAS) announced plans late Thursday to acquire the
British firm Entertainment One Ltd (ETO.LN), in a deal that values
the company at $4 billion. The toy maker's stock retreated
6.7%.
How are other markets trading?
The yield on the 10-year U.S. Treasury note fell 5.7 basis
points to 1.543%, while that of the 2-year note fell 8.3 basis
point to 1.544%
Stocks in Asia traded mixed overnight, as China's CSI 300 rose
0.7%, Hong Kong's Hang Seng Index gained 0.5% and Japan's Nikkei
225 climbed 0.4%.
In Europe, stocks traded mostly lower, with the Stoxx Europe 600
losing 0.3%.
In commodities markets, the price of U.S. crude oil fell 2.8%,
after China announced that U.S. crude oil would be subject to new
tariffs
(http://www.marketwatch.com/story/oil-falls-sharply-as-china-includes-crude-in-retaliatory-tariffs-2019-08-23).
Gold prices
(http://www.marketwatch.com/story/gold-prices-edge-higher-as-bond-yields-slide-2019-08-20)
rose 0.4% to $1,514 per ounce. The U.S. dollar , edged 0.2% higher
against its major rivals.
(END) Dow Jones Newswires
August 23, 2019 11:45 ET (15:45 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.