Wall Street Opens Lower on Trade Deal Uncertainty

By Investors Hub

The major U.S. index futures are currently pointing to a lower opening on Monday, with stocks likely to give back ground following the rally seen over the three previous sessions.

Profit taking may contribute to initial weakness on Wall Street, as traders cash in on the recent gains amid renewed uncertainty about a trade deal with China.

President Donald Trump announced on Friday that the U.S. and China have reached a ?very substantial phase one deal,? although reports this morning suggest China wants another round of talks before signing the agreement.

A person familiar with the matter told Bloomberg News that China may send a delegation led by Vice Premier Liu He to finalize a written deal that could be signed at the Asia-Pacific Economic Cooperation summit next month in Chile.

Another person told Bloomberg China wants Trump to also scrap a planned tariff hike in December in addition to the hike scheduled for this week.

Overall trading activity may be somewhat subdued, however, as the Columbus Day holiday may keep some traders away from their desks.

Stocks moved sharply higher over the course of the trading session on Friday, extending the strong upward move seen over the two previous sessions. With the rally over the past few sessions, the major averages more than offset the steep drop seen on Monday and Tuesday.

The major averages pulled back off their best levels going into the close but remained firmly positive. The Dow jumped 319.92 points or 1.2 percent to 26,816.59, the Nasdaq spiked 106.26 points or 1.3 percent to 8,057.04 and the S&P 500 surged up 32.14 points or 1.1 percent to 2,970.27.

For the week, the Dow and the Nasdaq both advanced by 0.9 percent, while the S&P 500 climbed by 0.6 percent.

The rally on Wall Street came as traders expressed continued optimism about U.S.-China trade talks, with Trump announcing late in the trading day that the two economic superpowers have reached a “very substantial phase one deal.”

Trump said the deal includes up to $40 to $50 billion in Chinese purchases of U.S. agricultural products as well as Chinese concessions on intellectual property and financial services.

In exchange for the concessions by China, the U.S. has agreed to hold off on an increase in tariffs originally scheduled for next week.

Trump said the agreement would take about three weeks to write and would likely be signed by both sides by the Asia-Pacific Economic Cooperation summit in Chile in November.

“Phase two will start almost immediately” after the first phase is signed, Trump said in an Oval Office meeting with China’s lead negotiator, Vice Premier Liu He.

Stocks spiked early in the session as Trump made upbeat comments about the negotiations on Twitter, tweeting, “Good things are happening at China Trade Talk Meeting. Warmer feelings than in recent past, more like the Old Days.”

Trump noted in a subsequent tweet that a potential trade deal with China would not have to go through the “very long and politically complex Congressional Approval Process.”

Oil service stocks moved sharply higher over the course of the trading session, driving the Philadelphia Oil Service Index up by 4.7 percent. The rally by oil service stocks came amid a jump by the price of crude oil.

Optimism about a U.S.-China trade deal also contributed to significant strength among steel stocks, as reflected by the 3.9 percent spike by the NYSE Arca Steel Index.

Semiconductor, transportation, chemical, and financial stocks also saw considerable strength on the day, reflecting broad based buying interest.

Meanwhile, gold stocks were among the few groups that bucked the uptrend, with the NYSE Arca Gold Bugs Index plunging by 4.6 percent. The sell-off by gold stocks came amid a steep drop by the price of the precious metal.