Stocks slightly lower as rally pauses on concerns about trade and interest rates

Stocks slightly lower as rally pauses on concerns about trade and interest rates

U.S. consumer prices up 1.8% for year

U.S. stocks were slightly lower Wednesday, taking a breather on renewed concerns about international trade policies and monetary policy, after a five week rally to benchmark indexes to record highs

How are major indexes trading?

The Dow Jones Industrial Average DJIA, +0.05% was off by 17 points, 0.1%, at 27,676. The S&P 500 was lower by about 3 points, 0.1%, at 3,089. The Nasdaq declined 10 points, or 0.1%, to 8,476.

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Bulls and bears fought to a standstill Tuesday as far as the Dow DJIA, +0.05% was concerned, with the blue-chip gauge ending unchanged at 27,691.49. The S&P 500 SPX, +0.00% rose 4.83 points, or 0.2%, to end at 3,091.84, while the Nasdaq Composite COMP, -0.10% rose 21.81 points to end at 8,486.09, up 0.3%. The finish marked a record close for the Nasdaq, while the Dow and S&P 500 remain near their highs.

What’s driving the market?

Federal Reserve chairman Jerome Powell is set to testify before lawmakers twice this week, with his first appearance coming at 11 a.m. Eastern before the Joint Economic Committee.

But in published remarks ahead of his testimony to Congress, Powell said interest rates are on hold unless there is a material deterioration of the economy.

“We see the current stance of monetary policy as likely to remain appropriate as long as incoming information about the economy remains broadly consistent with our outlook of moderate economic growth, a strong labor market, and inflation near our symmetric 2% objective,” Powell said, in remarks prepared for delivery to the Joint Economic Committee of Congress.

The Fed has cut interest rates in three quarter-point moves since July, putting the Fed’s benchmark federal funds rate in a range of 1.5%-2%.

Powell’s testimony “suggests that the bar to raise rates is higher than to lower them, even if easier policy is no longer the default option,” said Sal Guatieri, BMO Capital Markets senior economist.

In international trade news, in a Wednesday speech at the Economic Club of New York, Trump said a “significant phase one” deal could happen soon, but only if the deal worked to the advantage of U.S. workers and businesses. News reports also indicated Trump might put off a decision, due Wednesday, on whether to impose tariffs up to 25% on European auto imports.

The Wall Street Journal late Wednesday reported that tariffs were emerging as the main stumbling block to efforts by the U.S. and China to reach a limited trade deal. Specifically, the hurdle surrounds whether the U.S. has agreed to remove existing tariffs as part of a partial phase one deal or whether the U.S. would only cancel tariffs that are set to take effect on Dec. 15, the report said.

“Investors still seem to think this is mostly theatrics judging by the muted market reaction so far, but there’s no denying that even a partial deal is no longer ‘a sure thing,’” said Marios Hadjikyriacos, investment analyst at XM, in a note.

“Overall, the calm in the trade war and the broader risk-on sentiment of recent weeks may be more fragile than they appear, and with markets having gone on a euphoria rally lately, it might not take much bad news to trigger a notable correction,” he said.

Meanwhile, investors may also pay attention to House impeachment hearings.

U.S inflation was slightly higher than expected in October, the Labor Department said Wednesday morning. The consumer price index was up 0.4% during the month, a bit higher than the MarketWatch consensus forecast of 0.3% rise. Americans paid higher prices for gasoline, medical treatment and recreation in October, but overall, inflation remained low and stable. For the year the cost of living rose 1.8%.

Stocks to Watch

Earnings reports are expected Wednesday from tech heavyweight Cisco CSCO, +0.33%.

Shares of Canada Goose GOOS, -9.71% surged as trading began after beating earnings. Luckin Coffee LK, +13.86% shares were up by double-digits after reporting higher-than-expected revenue despite a wider loss.

Nike NKE, +1.03% will stop selling sneakers and apparel directly on Amazon.com Inc., AMZN, -0.68% the sportswear giant said.

Shares of Mosaic Co. MOS, -4.68% fell nearly 5% after an analyst downgrade.

Google’s GOOGL, +0.20% will soon offer checking accounts to consumers, becoming the latest Silicon Valley heavyweight to push into finance while drawing scrutiny from federal regulators for collecting health data without consent, the Wall Street Journal reported.

What are other markets doing?

December gold GCZ19, +0.80% rose $10.10, or 0.7%, to $1,463.80. The ICE U.S. dollar index DXY, +0.05% ticked up fractionally against a basket of currencies.

West Texas Intermediate crude for December delivery CLZ19, +0.77% , was down 0.9%, or 53 cents, to $57.33 a barrel on the New York Mercantile Exchange.

The 10-year U.S. Treasury note TMUBMUSD10Y, -2.44% slipped 5 basis points to 1.87%.

In Asia overnight, the China CSI 000300, -0.09% slipped and Hong Kong’s Hang Seng Index HSI, -1.82% fell 1.8%, while Japan’s Nikkei 225 Index NIK, -0.85% slipped 0.9%.

In Europe, the Stoxx Europe 600 SXXP, -0.34% fell 0.4%.

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