The Dow Jones Industrial Average fell over 600 points on Thursday as concerns over a U.S.-China trade deal and a global economic slowdown permeated investor sentiment a day after the markets took a breather to honor former President George H.W. Bush who passed away last Friday.
Following the Dow were the S&P 500, which retreated over 50 points while the Nasdaq Composite fell over 100 points as of 11:00 a.m. ET.
The reality that a tangible and permanent trade deal is necessary for the markets to continue responding to the upside might be settling in and the probability of reaching an agreement didn’t improve after news broke that Meng Wanzhou, the CFO of Huawei, one of the world’s largest mobile phone makers, was arrested in Canada and faces extradition to the U.S. Investors reacted to Wanzhou’s arrest negatively as it could possibly squelch a permanent trade deal between the U.S. and China.
“Unfortunately until we get new news the market continues to be a cauldron of concerns causing caution with investors,” said Art Hogan, B. Riley FBR’s chief market strategist. “With the combination of he said Xi said on China trade, a fear of an economic slowdown in 2019, and the slow trickle of Mueller investigation reports coming out, it is not at all surprising to see a buyer’s strike in the after-hours market.”
On Monday, the capital markets breathed a sigh of relief as U.S. President Donald Trump and Chinese president Xi Jinping agreed to cease fire on their tariff-for-tariff battle, giving the markets hope that a year-end rally could ensue. However, volatility returned on Tuesday with the Dow shedding almost 800 points.
The truce reached at the G-20 Summit didn’t quell investor fears as markets fretted on the notion that a trade deal can only materialize after lengthy discussions between the two economic superpowers. Furthermore, contentious topics like forced technology transfer and intellectual property could derail negotiations.
Trump and Jinping met at the G-20 Summit in Buenos Aires, putting global markets on pause as the two economic superpowers met to hopefully ameliorate their trade differences. As part of the agreement, both nations agreed to withhold imposing further tariffs on each other for 90 days while they work out a firm, ironclad deal.