By Sara Sjolin, MarketWatch , Ryan Vlastelica
Energy stocks fall, OPEC expected to boost output
U.S. stocks remained lower in midday trading on Friday after
President Donald Trump approved tariffs on about $50 billion of
Chinese goods, marking the latest escalation in the trade spat
between the two countries.
The day's losses were concentrated in the Dow Jones Industrial
Average, which has outsize exposure to the kind of multinationals
that are the most correlated to trade issues. While the S&P 500
turned lower for the week, the Nasdaq remains near the record it
closed at on Thursday.
How are markets performing?
The Dow Jones Industrial Average fell 0.9%, or 220 points, to
24,955. The S&P 500 lost 11 points to 2,771, a decline of 0.4%.
The Nasdaq Composite Index lost 29 points to 7,231, a decline of
0.4%.
What is driving the markets?
Trump on Friday announced tariffs
(http://www.marketwatch.com/story/trump-announces-china-tariffs-says-us-will-pursue-more-if-china-retaliates-2018-06-15)
on $50 billion worth of Chinese imports. Beijing has said that it
intends to assess tariffs on a corresponding amount of U.S. goods,
while Trump said the U.S. would pursue more tariffs if China
retaliates. Subsequently, Trump said there was no trade war with
China.
Trade tensions have been a major driver of market action over
the past several months, though there has been more rhetoric than
concrete actions thus far, and the issue hasn't been enough to
derail the general move higher. All three indexes are solidly
higher for June thus far -- with gains ranging between 2.5% to
nearly 4% -- and both the Dow and S&P 500 a few percentage
points away from joining the Nasdaq at record levels.
Read:Stock-market investors see China tariffs as a 'buzzkill'
(http://www.marketwatch.com/story/stock-market-investors-see-china-tariffs-as-a-buzzkill-and-are-acting-as-if-a-genuine-trade-war-just-erupted-2018-06-15)
Separately, U.S. traders largely ignored the latest policy
meeting by the Bank of Japan. The central bank stuck to its easing
policy
(http://www.marketwatch.com/story/boj-holds-to-easing-path-keeps-rates-at-ultralow-level-2018-06-15),
keeping short-term interest rate at minus 0.1% and its target for
the yield on 10-year government bonds at around 0%. The decision
comes just a day after the European Central Bank said it plans to
ends its quantitative easing program in December, but will keep
rates at record lows at least until next summer.
What are strategists saying?
"The trade issue has escalated into something bigger. It isn't
just rhetoric anymore; Trump wants to get these tariffs into place
and it looks like it is going to happen. Once again the question is
what retaliation we could see from other countries, and whether
this becomes a full trade war, which would be really bad," said
Michael Mullaney, director of global market research at Boston
Partners.
"Historically, tariffs slow down trade volumes, increase costs,
and hit margins. It's a no-win situation across the board, and it
could result in a significant downdraft on GDP from a global basis,
depending on how severe it becomes. Given how strong earnings
projections are, it would be extremely unusual for this to be a
down year in stocks, but a trade war could do it," he said.
What's on the economic calendar?
The Empire State manufacturing survey rose 4.9 points in June to
a reading of 25
(http://www.marketwatch.com/story/empire-state-manufacturing-index-climbs-to-best-level-in-eight-months-in-june-2018-06-15),
the highest reading since October. Separately, manufacturing
production declined 0.7% in May, while capacity utilization dropped
to 77.9% from 78.1% in the previous month.
The University of Michigan's gauge of consumer sentiment rose to
99.3 in June.
In Federal Reserve speakers, Dallas Fed President Rob Kaplan
will appear in a moderated discussion at a Fort Worth Chamber of
Commerce lunch at 1:30 p.m. Eastern.
Stock movers
Energy-related stocks were in focus as crude-oil prices fell,
dropping on expectations that the Organization of the Petroleum
Exporting Countries and its allies will agree next week to boost
output
(http://www.marketwatch.com/story/oil-under-pressure-on-expectations-of-opec-output-hike-2018-06-15).
The Energy Select Sector SPDR ETF (XLE) sank 2.1%. Among major
movers, Exxon Mobil Corp. (XOM) fell 1.3% while Occidental
Petroleum Corp. (OXY) was off 1.4%.
Adobe Systems Inc. (ADBE) lost 2.7% a day after reporting its
quarterly results
(http://www.marketwatch.com/story/adobe-stock-falls-after-earnings-but-stifel-jp-morgan-hike-price-targets-2018-06-15).
Teva Pharmaceutical Industries Ltd.(TEVA) dipped 0.5% after the
drugmaker said it would discontinue the phase 3 trial
(http://www.marketwatch.com/story/teva-to-end-late-stage-trial-of-chronic-cluster-headache-treatment-after-disappointing-results-2018-06-15)
of its treatment for chronic cluster headaches.
Qualcomm Inc.(QCOM) extended its cash tender offer for NXP
Semiconductor N.V.'s (NXPI) outstanding shares. This is at least
the 25th time
(http://www.marketwatch.com/story/qualcomm-extends-tender-offer-of-nxp-shares-for-at-least-the-25th-time-2018-06-15)
that Qualcomm has done so over the past 16 months. Shares of
Qualcomm fell 0.1% while NXP was up 0.5%.
Etsy Inc.(ETSY) rose 3.2%, extending a massive surge
(http://www.marketwatch.com/story/etsys-stock-rockets-to-highest-ever-price-2nd-biggest-gain-2018-06-14)
in Thursday's session that took it to record levels. The gain came
after it raised its revenue outlook and fee structure. The stock
has jumped more than 30% this week.
On the upside, defensive sectors were higher on the day
(http://www.marketwatch.com/story/these-stocks-are-on-the-rise-as-trade-tensions-force-investors-to-play-defense-2018-06-15),
bucking the negative tone of the overall market. Consumer staples
rose 0.7% while real estate was up 0.5%. Such sectors are seen as
safer in periods of time of economic uncertainty, as the growth
they offer tends to be lower than the overall economy, but more
stable.
What are other markets doing?
Asian markets closed mixed, with Chinese and Hong Kong stocks in
the red as investors there mulled the increased risks of a trade
war
(http://www.marketwatch.com/story/asian-markets-largely-shrug-off-trumps-approval-of-tariffs-on-china-2018-06-14).
Stocks in Europe were mixed, as the euro rebounded from its
selloff on Thursday.
The ICE U.S. Dollar Index was down 0.1% at 94.723.
Oil prices and gold were both lower.
(END) Dow Jones Newswires
June 15, 2018 12:37 ET (16:37 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.