Dow futures dropped by more than 100 points on Wednesday, as global equities sold off on revived fears about a full-scale U. S-China trade war.
What did the benchmarks do?Dow Jones Industrial Average futures YMU8, -0.55% slid 126 points, or 0.5%, to 24,176, while S&P 500 futures ESU8, -0.49% dropped 12 points, or 0.4%, to 2,716.50. Nasdaq-100 NQU8, -0.88% dropped 57.25 points, or 0.8%, to 7,047.50.
On Tuesday, the Dow Jones Industrial Average DJIA, +0.12% rose just 0.1%, to 24,283.11, closing below its 200-day moving average for the second straight session. The S&P 500 index SPX, +0.22% gained 0.2% and the Nasdaq Composite Index COMP, +0.39% rose 0.4%.
What’s driving markets?U.S. stock futures turned sharply lower, following in the footsteps of losses in Asia, where the Hang Seng Index and the Shanghai Composite both slid more than 1%. The negative sentiment was also spreading to Europe.
The moves were seen as a sign of renewed nerves over trade tensions, as President Donald Trump indicated a commitment to protectionist policies, though he walked back a threat of tough new curbs on Chinese investment in technology. China’s Ministry of Commerce said Wednesday that is closely watching Washington’s attempts to restrict Chinese investment as trade hostilities escalate, the Wall Street Journal reported.
Read: Trade-war tracker: Here are the new levies, imposed and threatened
Speculation about Beijing’s next tactic was in focus amid an unconfirmed report from SGH Macro Advisors that President Xi Jinping has warned his cabinet to get ready for a “full-scale trade war” and that the People’s Bank of China is ready to refrain from buying U.S. Treasurys, or even cut its purchases.
China is a massive holder of U.S. Treasurys, and investors have been concerned about the impact of the PBOC shedding those bonds. The yield on the 10-year Treasury note TMUBMUSD10Y, -0.73% fell by 2.7 basis points to 2.849% on Wednesday.
In addition, China’s central bank guided the yuan CNYUSD, -0.4403% to a six-month low against the U.S. dollar on Wednesday, sending the Chinese currency tumbling.
And read: Why a major trade war could mean a ‘full-blown recession’
What are strategists saying?“China President Xi brought out the big guns: Warned leaders to be ready for a full-scale trade war with the U.S.; also noted PBOC will refrain from buying U.S. Treasurys and will seek to reduce them “appropriately”—press citing Xi in meeting with other leaders,” said Stephen Innes, senior trader with Oanda, in a note to clients.
However, Innes added that it seems unlikely China will ratchet up tensions with the U.S. to this level, as such a move would “severely erode the value of their massive Treasury holdings while throwing global capital markets into complete disarray.”
Which stocks are in focus?Shares of World Wrestling Entertainment Inc. WWE, +0.24% rallied 15% in thin premarket trade after the company said it has signed a deal for its most prominent wrestling programming with Comcast-owned CMCSA, -1.03% USA Network and FOX, -0.98% Fox Sports.
Sonic Corp. SONC, +1.77% fell 8.1% ahead of the bell after the fast-food company late Tuesday reported disappointing revenue, even as quarterly earnings beat forecasts.
Aquinox Pharmaceuticals Inc. AQXP, -0.65% shares slid 73% premarket after the company’s cystitis drug trial failed to meet its main goal.
Shares of Conagra Brands Inc. CAG, -1.82% fell 2.7% in premarket after the packaged-foods group said it would acquire rival Pinnacle Foods Inc. PF, +2.40% in a cash and stock deal valued at $10.9 billion. Pinnacle shares slid over 4%.
Which economic reports are on the docket?Readings on durable goods orders and advance trade in goods in May are scheduled for release at 8:30 a.m. Eastern Time. The trade deficit is in particular focus given the Trump administration’s policy moves. That will be followed by data on pending home sales at 10 a.m.
A pair of Federal Reserve officials are scheduled to appear: Fed Vice Chairman for bank supervision Randal Quarles will talk about international bank regulation at the Utah Bankers Association convention in Sun Valley, Idaho, at 11 a.m., and Boston Fed President Eric Rosengren speaks on economic downturns at the Peterson Institute in Washington, D.C. at 12:30 p.m.
What are other markets doing?European stocks SXXP, +0.10% were sliding, after Asian equity markets fell across the board over trade concerns. The Hang Seng HSI, -1.82% in Hong Kong ended down 1.8%, while the Shanghai Composite SHCOMP, -1.10% fell 1.1%.
West Texas Intermediate crude oil futures CLQ8, +0.85% the U.S. benchmark, rose 0.8% to $71.09 a barrel, after rallying 3.6% on Tuesday to settle at $70.53, their highest level since May 21.
Gold futures GCQ8, -0.10% fell to $1,258.80 an ounce, while the ICE U.S. Dollar Index DXY, +0.25% was up 0.2%.
