por admin » Vie Ago 23, 2019 9:07 am
Dow turns positive after Powell pledges to sustain the economic expansion
PUBLISHED 7 HOURS AGO UPDATED 2 MINS AGO
Fred Imbert
@foimbert
Sam Meredith
@smeredith19
CNBC.COM
China plans to raise import tariffs on $75 billion worth of US goods
Stocks opened lower on Friday after China said it will slap new tariffs on U.S. goods.
The Dow Jones Industrial Average slid 179 points, or 0.7%. The S&P 500 pulled back 0.7% while the Nasdaq Composite fell 0.9%. Losses were muted slightly as traders awaited a speech from the Federal Reserve chief on monetary policy.
China will implement new tariffs on another $75 billion worth of U.S. goods, including autos. The tariffs will range between 5% and 10% and will be implemented in two batches on Sept. 1 and Dec. 15.
This is the latest escalation in the trade war that has been going on since last year. Earlier this month, President Donald Trump said the U.S. will impose tariffs on $300 billion worth of Chinese imports. The administration then said some of those tariffs would be delayed.
Shares of General Motors and Ford Motor fell by 1.7% and 2.1%, respectively. Fiat Chrysler slid 1.4% along with Tesla.
Lintao Zhang | Pool | REUTERS
Lintao Zhang | Pool | Reuters
Lintao Zhang | Pool | REUTERS
Fed Chairman Jerome Powell is expected to address an audience of policymakers and economists at 10 a.m. ET. He faces the tough challenge of presenting a unified voice on Fed policy from the most divided U.S. central bank in years.
It comes as both the Fed and Powell are under an unprecedented siege from an angry president, while a speech that fails to assure investors the U.S. central bank will continue to cut interest rates could create even more market volatility.
As of Friday morning, Fed funds futures were pricing a likelihood of almost 90% for a 25-basis point rate cut at the September meeting, and between one or two further quarter-point rate cuts between then and the end of the year.
The yield curve remained only slightly positive on Friday morning ahead of Powell's speech. The spread between the 10-year Treasury yield and the 2-year rate inverted on Thursday after Fed members indicated a September rate cut was not a certainty, raising fears that the central bank would not be quick enough to save the economy from a recession. The yield curve has been a reliable recession indicator in the past.
"Further improvement in investor psychology is likely to require additional good news," said Masanari Takada, macro and quant strategist at Nomura, in a note. "If Powell's speech turns out to under-deliver, the risk of equity sentiment falling toward a second bottom in line with past patterns could emerge next week."
However, St. Louis Fed President James Bullard told CNBC's Steve Liesman on Friday that the central bank should keep cutting rates, noting that an inverted yield curve is "not a good place to be."
"If Powell is sufficiently dovish, then 10's-2's should widen out towards 5 basis points, and that should help stocks rally. Conversely, if Powell is not sufficiently dovish, 10s'-2's will invert, likely notably, and in that case, if could get a bit ugly for stocks in the afternoon," Tom Essaye, founder of The Sevens Report, said in a note