After a meteoric rise Wednesday following the FOMC meeting announcement and subsequent press conference with Federal Reserve Chairman Jerome Powell, U.S. stocks reversed all the gains from yesterday, to trade back below Thursday’s range amid Impeachment and China trade deal woes.
As of 12:45 pm ET, the Dow was down 250 points (0.91%), the S&P 500 down 21 points (0.69%) and Nasdaq down 40 points (0.48%).
As anticipated, the Federal Reserve cut rates Wednesday by 25 points to a range of 1.5% to 1.75%, as part of what Fed Chairman Jerome Powell has characterized this year as a “midcycle adjustment” in a maturing economic expansion.
The FOMC statement seemed generally positive and noted that, “Information received since the Federal Open Market Committee met in September indicates that the labor market remains strong and that economic activity has been rising at a moderate rate,” with stocks climbing rapidly higher and closing at fresh all-time highs, which continued in overnight trading.
But on Thursday stocks gave back all their gains and then some, despite better-than-expected earnings from Facebook and Apple and the Federal Reserve’s third rate cut of 2019. Investors instead focused on impeachment news and U.S.-China trade negotiations.
Bloomberg News reported Thursday, citing unnamed sources, that Chinese officials have been dubious as to weather a long-term trade deal with the U.S is possible. The report added Chinese officials are worried about President Donald Trump’s “impulsive nature” and the risk of him backing out of any kind of deal.
“Whenever you see a lowering of trade-deal expectations, it’s going to upset markets,” said Jeff Kilburg, CEO of KKM Financial. “Here we are at new all-time highs, so the sensitivity to any type of headwind in the U.S.-China trade tariff negotiations is going to be an overreaction.”
Trump tried, to no avail, to mitigate fears before Thursday’s open, saying in a tweet: “China and the USA are working on selecting a new site for signing of Phase One of Trade Agreement, about 60% of total deal, after APEC in Chile was canceled do to unrelated circumstances. The new location will be announced soon. President Xi and President Trump will do signing!”
Meanwhile, House Democrats on Thursday passed a resolution outlining the next phase of the impeachment inquiry into President Donald Trump.