Escalating Trade Dispute May Lead to Pullback on Wall Street

By Investors Hub

The major U.S. index futures are currently pointing to a lower opening on Friday, with stocks likely to move back to the downside following the attempted recovery from an early sell-off in the previous session.

Concerns about the economic impact of an escalating trade dispute between the U.S. and China may weigh on the markets after the U.S. raised tariffs on Chinese imports.

The U.S. hiked the tariff on $250 billion worth of Chinese goods from 10 percent to 25 percent after the U.S. and China failed to reach a trade deal by a midnight deadline.

President Donald Trump noted in a post on Twitter that the process has begun to place tariffs on the remaining $325 billion worth of Chinese imports.

Trump praised the massive tariff payments to the U.S. Treasury and said there is ?absolutely no rush? to reach a trade agreement with China.

?Tariffs will bring in FAR MORE wealth to our Country than even a phenomenal deal of the traditional kind. Also, much easier & quicker to do,? Trump tweeted.

?Tariffs will make our Country MUCH STRONGER, not weaker. Just sit back and watch!? he added. ?In the meantime, China should not renegotiate deals with the U.S. at the last minute. This is not the Obama Administration, or the Administration of Sleepy Joe, who let China get away with ?murder!??

After falling sharply early in the session, stocks regained ground over the course of the trading day on Thursday but still closed mostly lower. Reaction to comments from Trump was the main driver of trading on the day.

The major averages finished the session in negative territory but well off their worst levels of the day. The Dow slid 138.97 points or 0.5 percent to 25,828.36, the Nasdaq fell 32.73 points or 0.4 percent to 7,910.59 and the S&P 500 slipped 8.70 points or 0.3 percent to 2,870.72.

The initial sell-off on Wall Street came amid renewed trade concerns following tough talk from Trump ahead of two days of U.S.-China trade talks in Washington.

Trump claimed during a rally in Florida on Wednesday that the U.S. is planning to raise tariffs on Chinese goods because China “broke the deal.”

“So they’re flying in, the vice premier tomorrow is flying in ? good man ? but they broke the deal,” Trump told his supporters. “They can’t do that, so they’ll be paying.”

However, stocks staged a recovery attempt after Trump told reporters at the White House a trade deal with China is still possible.

Trump indicated he has set a midnight deadline to reach a trade agreement, calling raising tariffs an “excellent” alternative.

Analysts have previously urged investors to focus on Trump’s actions rather than his words, suggesting the president’s bluster is merely a negotiating tactic.

On the U.S. economic front, the Commerce Department released a report showing the U.S. trade deficit widened in the month of March.

The report said the trade deficit widened to $50.0 billion in March from a revised $49.3 billion in February. Economists had expected the deficit to widen to $50.2 billion.

The wider trade deficit came as the value of imports surged up by 1.1 percent to $262.0 billion compared to a 1.0 percent jump in the value of exports to $212.0 billion.

The Labor Department also released a report showing producer prices increased in line with economist estimates in the month of April.

The report said producer price index for final demand rose by 0.2 percent in April after climbing by 0.6 percent in March. The uptick in prices matched expectations.

Excluding food and energy prices, core producer prices inched up by 0.1 percent in April after rising by 0.3 percent in March. Economists had expected core prices to edge up by 0.2 percent.

A separate Labor Department report showed first-time claims for U.S. unemployment benefits pulled back by less than expected in the week ended May 4th.

The Labor Department said initial jobless claims dipped to 228,000, a decrease of 2,000 from the previous week’s unrevised level of 230,000. Economists had expected jobless claims to drop to 220,000.

Despite the recovery attempt by the broader markets, significant weakness remained visible among networking stocks.

The NYSE Arca Networking Index regained ground after hitting its worst intraday level in well over a month but still ended the day down by 2.2 percent.

Considerable weakness also remained visible among semiconductor stocks, as reflected by the 1.2 percent loss posted by the Philadelphia Semiconductor Index.

Intel (INTC) plunged by 5.3 percent after BMO Capital downgraded its rating on the semiconductor giant to Market Perform from Outperform.

Gold, chemical, and computer hardware stocks also ended the day notably lower, while most of the other major sectors showed more modest moves.