Here are five things that you should know about how U.S. equities are responding to President Trump’s threat to increase tariffs on Chinese imports:
Wall Street is Skeptical
The threat is being taken in stride at Goldman Sachs Group Inc., and Citigroup Inc., where policy analysts are optimistic that a trade deal between the U.S. and China can still be reached. UBS Group AG said “the president’s words are worrisome but not yet our baseline.” Tom Lee, co-founder of Fundstrat Global Advisors LLC, recommended that investors buy the dip in U.S. stocks.
Materials And Tech Are Hardest Hit
Materials and tech stocks bore the brunt of the tariff worries. Chemicals stocks paced losses, with DowDuPont Inc., Eastman Chemical Co. and LyondellBasell Industries NV all falling more than 2 percent. An escalation in the U.S.-China trade war “bodes most negatively for base metals because of their strong relationship with financial markets,” according to the Commonwealth Bank of Australia. Meanwhile, chip stocks fell as much as 3.7 percent, their biggest drop in three months, and Apple Inc. slumped as much as 3.9 percent as Wedbush Securities Inc. saw renewed trade concerns as an ill-timed “gut punch” and said the prospect of additional tariffs “remains the biggest risk for tech stocks over the coming months.”
Usual Trade Victims
Frequent trade casualties Caterpillar Inc. and Deere & Co. dropped sharply on Monday as analysts saw risks to agriculture stocks. Deere’s 5.3 percent drop intraday was the stock’s worst performance in five months. Grain futures plummeted to a 42-year low as the prospect of an end to the crippling tariffs that Beijing imposed on U.S. soy, corn and wheat exports had been one of the few positives for American agriculture markets.
Hot IPOs Shrug Off Losses
Investor excitement about newly-listed stocks such as Beyond Meat Inc. and Pinterest Inc. was enough to overshadow macro worries. Both stocks erased early declines while Zoom Video Communications Inc., another high-flying newcomer, fluctuated between gains and losses. Beaten-down Lyft Inc. wasn’t able to throw off the market concerns, which added to tensions already brewing this week around its first earnings report, a driver strike and Uber Technologies Inc.’s IPO.
Some Green Shoots
While stocks had broadly climbed from lows by midday, a handful of companies were notable outperformers. Small-cap drugmakers Esperion Therapeutics Inc. and Axsome Therapeutics Inc. rose on positive regulatory updates, while Sinclair Broadcast Group Inc. got a positive reception to its plan to acquire 21 regional sports networks from Walt Disney Co. And semiconductor company Aquantia Corp. spiked after a deal to be acquired by Marvell Technology Group Ltd.