Navarro walks back earlier statement suggesting U.S. – China trade deal was “over”, Trump confirms trade deal “intact”
U.S. stock indexes early Tuesday headed firmly higher and the Nasdaq aimed for an eight straight advance, as stocks recovered sharply from an overnight shock when White House trade adviser Peter Navarro suggested to Fox News in a late-Monday interview that the trade agreement with China, signed in January, had been terminated.
Later, Navarro said his comments were “wildly” taken out of context and the phase-one pact remained in force. Trump also tweeted that the agreement was intact.
How are benchmarks performing?
The Dow Jones Industrial Average DJIA, 0.48% was up 200 points, or 0.8%, at about 26,225, supported by gains in Apple, JPMorgan Chase & Co. JPM, 1.48%, and Goldman Sachs GS, 0.34% ; the S&P 500 index SPX, 0.64% gained 25 points, or 0.8%, at around 3,143; while the Nasdaq Composite Index COMP, 0.90% advanced 93 points, or 0.9%, at 10,150, trading near an intraday high at 10,151.43.
On Monday, the Dow advanced 153.50 points, or 0.6%, to end at 26,024.96. The S&P 500 rose 20.12 points, or 0.7%, to finish at 3,117.86, while the Nasdaq picked up 110.35 points, or 1.1%, closing at a record high of 10,056.47, while booking its seventh day in a row of gains and clinching its longest win streak since Dec. 26, 2019, according to Dow Jones Market Data.
What’s driving the market?
Early signs of economic recovery, as business activity resumes after the lockdowns imposed to combat the coronavirus pandemic, have driven U.S. stock prices higher in recent weeks, but the sensitivity of the market to China-U.S. trade developments and the concentration of technology-related companies propelling the market higher is drawing increased attention on Wall Street.
Markets got a jolt of late-night volatility after Navarro, in a Monday evening interview on Fox News, said the China trade deal was over, citing unnamed intelligence officials that allegedly point to a Wuhan laboratory as the source of the COVID-19 pandemic.
“Here’s the turning point,” Navarro told Fox host Martha MacCallum. “They came here on January 15th to sign that trade deal, and that was a full two months after they knew the virus was out and about,” he said.
Fox’s MacCallum asked: “The president…he obviously really wanted to hang onto this trade deal, as much as possible, he wanted them to make good on the promises, because there had been progress made on that trade deal. But given everything that’s happened and all the things you just listed, is that over?” Navarro replied, “It’s over, yeah”.
Minutes later, the adviser said that his comments were “taken wildly out of context.” They had nothing at all to do with the phase-one trade deal, which continues in place, he told the Wall Street Journal. “I was simply speaking to the lack of trust we now have of the Chinese Communist Party after they lied about the origins of the China virus and foisted a pandemic upon the world,” he was quoted as saying.
Trump also said via Twitter Monday night that the China trade was “fully intact.”
“Hopefully they will live up to the terms of the agreement!” he wrote.
The Trump administration has long blamed China of mishandling the COVID-19 outbreak.
U.S. stock futures fell, along with Chinese equities and the yuan USDCNY, -0.12% USDCNH, -0.08% in Tuesday Asian overnight trade, underscore the uncertainty and fragility of the Sino-American relationship.
“It appears this administration is ever so confused as the President says one thing and [his] trade advisor says another,” wrote Peter Cardillo, chief market economist at Spartan Capital Securities, in a daily research note.
“We believe, these type’s of uncertainties could lead to another round of unsettled markets in spite of the Fed’s printing presses working at full speed,” he said referring to the Federal Reserve efforts to stimulate financial markets in the throes of the COVID-19 pandemic.
Meanwhile, the The Nasdaq Composite’s advantage over the Dow and S&P 500 is the biggest since 1983, while the divergence between the S&P 500 and the Dow is widest since 2002, according to Dow Jones Market Data, highlighting the strength of a handful of stocks, including Apple AAPL, 2.00%, Microsoft M, -1.62%, Facebook FB, 1.32%, Amazon.com AMZN, 1.73%, and Google-parent Alphabet GOOGL, 0.53% GOOG, 0.53%.
In economic reports, IHS Market’s preliminary, composite PMIs rose to 46.8 in June from 37 in the prior month, highlighting a nascent economic recovery afoot. The data showed services rose to 46.7 in June from 36.9 in the prior month and manufacturing activity rising to 49.6, compared with 39.8 in the previous period. The purchasing managers index for the eurozone—a measure of activity in the manufacturing and services sectors—rose to 47.5 in June from 31.9 in May to reach its highest level since February, the month before lockdowns began in Europe. A reading of 50 or better indicates improving conditions.
Meanwhile, New U.S. new home sales increase 16.6% in May to 676,000 annual rate, compared with estimates for a gain 632,000.
Which stocks are in focus?
- American Airlines Inc. AAL, -6.60% priced an offering of 74.1 million shares at $13.50 a share on Tuesday, moving to raise cash and bolster its liquidity position during the coronavirus pandemic. The airline also priced an offering of $1 billion of convertible bonds that mature in 2025 at 6.50%. Shares were off 0.4% early Tuesday.
- Shares of Palatin Technologies Inc. PTN, +23.25% said it would test one of its investigational drugs as a treatment for COVID-19.
- Apple Inc. shares AAPL, 2.00% headed 1.2% higher for a fresh record on Tuesday after its World Wide Developers Conference.
- Starbucks Corp. SBUX, -0.32% said Tuesday that it will launch its summer menu in the U.S., which will include the Impossible Breakfast Sandwich. Shares gained 0.9%.
- Greenwich LifeSciences GLSI, set terms for its planned initial public offering on Tuesday, with plans to offer 1 million share priced at $7.50 to $8.50 a pop.
How are other assets performing?
West Texas Intermediate U.S. crude US:CLN20 rose 60 cents, or 1.4%, at $41.43 a barrel on the New York Mercantile Exchange. In precious metals, gold futures for August GCM20, +0.91% gained $8.30, or 0.5%, at $1,774.70 an ounce.
The 10-year Treasury note yield TMUBMUSD10Y, 0.716% rose 2.3 basis points to 0.73%. Bond prices move inversely to yields.
The greenback was down 0.3% against basket of its major rivals, based on trading in the ICE U.S. Dollar Index DXY, -0.65%.
In global equities, the Stoxx Europe 600 index SXXP, 1.06% traded 1.4% higher, while the FTSE 100 index UKX, 1.09% also advanced 1.4%. In Asian markets, China’s benchmark CSI 300 index 000300, +0.48% gained 0.4%, the Japanese Nikkei NIK, +0.49% picked up 0.5% lower, Hong Kong’s Hang Seng HSI, +1.61% gained 1.6%, and South Korea’s Kospi index 180721, +0.21% inched up 0.2%.