Stocks slipped Wednesday after U.S. retail sales fell for the first time in seven months in September, offsetting a good star to the third quarter corporate earnings reporting season.
A Chinese protest against a bill passed by the U.S. House of Representatives in support of Hong Kong also cast doubt on prospects for the future of the trade deal between the two countries announced last Friday.
What are major indexes doing?
The Dow Jones Industrial Average DJIA, -0.08% was down 14 points or 0.05% around 27,011 in early afternoon trade, while the S&P 500 SPX, -0.27% was down 7 points, 0.2% lower, at 2,988 and the Nasdaq COMP, -0.45% was down 32 points, or 0.4%, at 8,116.
On Tuesday, the Dow rose 237.44 points, or 0.9%, to end at 27,024.80, while the S&P 500 advanced 29.53 points, or 1%, to close at 2,995.68, leaving it 1% away from its all-time closing high of 3,025.86 set on July 26. The Nasdaq Composite finished at 8,148.71 after gaining 100.06 points, or 1.2%.
What’s driving the market?
U.S. retail sales fell in September for the first time in seven months raising concerns that the slowdown in business spending evident in the manufacturing sector, resulting from President Trump’s international trade policies, may be spilling over into consumer spending.
“Consumption is poised to cool along with slower job gains ahead, and the Fed will be looking closely for any signs of trade uncertainty contaminating the most important segment of the U.S. economy,” said economist Katherine Judge of CIBC Capital Markets.
The probability of an October interest rate cut by the Federal Reserve rose to 90% on Wednesday after the retail sales data was published, up from 78% on Tuesday.
The IMF warned on Wednesday that the U.S. stock market was overvalued as belief in a Federal Reserve rescue for the economy is allowing investors to ignore tensions over international trade policy.
Earlier, China threatened to retaliate over a series of bills backing pro-democracy protesters in Hong Kong that unanimously passed the House of Representatives late Tuesday.
“We think it’s possible this bill will push China into a public show of defiance against U.S. ‘interference,’” which could mean a crackdown on Hong Kong protesters, said Jasper Lawler, head of research at London Capital Group, in a note. “Under that scenario, markets would be relieved if China’s retaliation kept the trade pact intact. However, higher political uncertainty in Hong Kong would be a sizable downside risk,” Lawler said.
See: China vows ‘strong countermeasures’ in wake of U.S. bill supporting Hong Kong protesters
The Wall Street Journal also reported there are questions about the amount of U.S. agricultural products China will actually buy as part of the tentative trade deal announced last week. At a meeting with Italian President Sergio Mattarella at the White House on Wednesday, President Donald Trump said he would likely not sign any trade deal until mid-November.
Meanwhile, the third quarter U.S. corporate earnings reporting season got off to a good start this week. Of the S&P 500 index companies that have reported through Wednesday morning, 83% have topped analyst expectations, FactSet data shows.
Which stocks are in focus?
Shares of Bank of America Corp. BAC, +1.75% were higher after the company reported third-quarter profit that topped Wall Street expectations.
Shares of United Airlines Holdings Inc. UAL, +2.91% were higher after third-quarter profit reported after Tuesday’s close topped expectations and the company raised guidance for the year.
Shares of General Motors GM, +1.25% rose more than 2% Wednesday after news that the car maker and the United Auto Workers union had reached a tentative deal to end the months long strike at GM.
Shares of MGM Resorts International MGM, -2.10% fell after it announced late Tuesday that it would sell its Circus Circus casino resort in Las Vegas and a huge interest in its Bellagio resort.
After the closing bell, results are expected from streaming-video company Netflix Inc. NFLX, -0.64%, computing giant International Business Machines Corp. IBM, -0.71%, metals maker Alcoa Corp. AA, -0.44% and railroad CSX Corp. CSX, -0.65%.
How are other markets trading?
In commodities, crude oil prices CLX19, +1.10% were 71 cents, 1.3%, higher, trading at $53.52 a barrel on the New York Mercantile Exchange. Gold futures GCZ19, +0.63% rose $7.00, or 0.5%, to $1,490.40. The dollar DXY, -0.26% was 0.25% lower than a basket of other currencies. The U.S. 10-year Treasury note was two basis points lower to 1.75.
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