Expecting a stiff upper lip from Wall Street as we worm our way toward high-profile U.S.-China trade talks is a formidable task.
Stocks are setting up for another tough day after Asia stocks crumbled under the weight of recent U.S.-China tensions. A mauling for Wall Street equities Tuesday left all but three dozen S&P 500 stocks finishing in the black, and all three major indexes are down about 2% this week.
Not helping the mood, fresh data from China showed a surprise drop in exports. As analysts at TD Securities point out, the trade deficit with the U.S. remains close to record highs, “a fact that will likely not go unnoticed in trade talks tomorrow and Friday.”
“One fly in the ointment would be this. If this [trade talks] really go south, that would change global growth.” — Jamie Dimon, CEO of JP Morgan Chase
This too shall pass? So says our coolheaded call of the day from the head of global banking giant JPMorgan Chase, Jamie Dimon, who believes smart people on both sides will make a trade deal happen, and he sees an 80% chance of that happening. As for the pullback we’ve seen from the stock market lately, he says that’s not been too out-of-the-ordinary.
“If you just raised the odds of a real global trade war a little bit, that was a rational reaction,” Dimon told Bloomberg in an interview Wednesday at the bank’s annual China summit in Beijing. “The market will fluctuate, economies will fluctuate. People will always get scared and overreact.”
He explains more about the market psyche right now that has wiped 2% off major indexes this week: “The odds of something bad happening [in trade negotiations] is now double. Whatever you thought they were — 2%, 5%, 10% is probably doubled. That’s why the market is reacting to it because they’re not just afraid of the direct effect, they’re afraid if it reverses global trade, it reverses global growth and hurts trade around the world,” he said.
But then investors aren’t looking at all the good news that’s milling around, he says. “China’s growing at 6.5% — that’s a trillion dollars in growth. America is growing at almost 3%, which is half a trillion dollars in growth,” said Dimon. “One fly in the ointment would be this. If this [trade talks] really go south, that would change global growth.”
As for the timing of that deal, Dimon isn’t so optimistic Friday will be the day, but is hoping those higher China tariffs don’t get put in place. The CEO said both the U.S. and China should take their time to get it done right, with signs that “enormous progress” has already been made. “I’d rather not do a deal than do a bad one,” he said.
He also touched on U.S. Treasury bonds, which have been gauging how rattled investors have become lately.
The 10-year Treasury yield TMUBMUSD10Y, -0.22% fell to a five-week low of 2.448% on Tuesday, logging its biggest daily decline since March 22 as the threat of a trade-war escalation drove investors toward haven assets such as bonds. Yields fall and prices rise when investor confidence wanes and demand for perceived safer investments pick up.
Dimon said the current yield on the 10-year Treasury note is looking “extraordinarily low,” and he’s told his board of directors the bank has to be “able to handle 5%, 7%, 8%, 10% because you don’t know.”
He shied away from offering up a year-end forecast for bond yields, but said “4% when you are having fairly good growth isn’t a bad number.”
The market
The Dow DJIA, -0.01% , S&P 500 SPX, -0.05% and Nasdaq COMP, -0.06% are off to another day of losses. Read more in Market Snapshot
Read: The only 36 stocks in the S&P 500 that closed with gains on Tuesday
The dollar DXY, +0.00% is softer, but not against the New Zealand dollar NZDUSD, -0.2728% after that country’s central bank cut its key lending rate for the first time since 2016. Gold US:GCU8 is up, U.S. crude US:CLU8 is up. Gold GCM9, -0.13% is tapping a one-month high.
Europe stocks SXXP, -0.04% are lower, while Asia stocks had a tough day, with the Nikkei NIK, -1.46% and Shanghai Composite SHCOMP, -1.12% losing more than 1% each.
Startup exchange Binance says hackers stole around $41 million worth of bitcoin due to a “large-scale security breach”, with 7,000 swiped from a single wallet. No huge reaction so far from Bitcoin BTCUSD, -0.23% which is down about 1%.
The chart
Our chart of the day from Cresset Wealth Advisors (h/t The Daily Shot) is a timely reminder of what’s at stake for some of the U.S.’s biggest companies should a trade deal with China run into serious trouble. The chart shows which companies have the biggest chunk of revenue from China, with Apple AAPL, +0.54% ahead by miles.
The buzz
Iran says it will pull out of some of the nuclear agreements reached in a 2015 landmark agreement, a year after the U.S. did the same. That’s U.S. Secretary of State Mike Pompeo made a surprise visit to Iraq as tensions rise between the two countries.
Earnings highlights for Wednesday includes Disney DIS, +0.67% online marketplace Etsy ETSY, -0.60% retailer Costco COST, +0.42% and streaming-device maker Roku ROKU, +1.16% after the closing bell.
Read: Disney lines up its biggest movies through 2027; get ready for lots of ‘Avatar’
Electronic Arts EA, +2.60% stock is rising after an upbeat forecast and sales numbers for the videogame maker. Shares of Papa John’s PZZA, +2.22% are also up after the pizza chain topped Wall Street views.
Sprint S, -3.11% has reported the biggest decline in cellphone clients since 2015.
Read: Google unveils new privacy tools, smarter AI assistant, cheaper phones
And: Sweden’s ABB creates world’s first carbon-neutral factory
The tweet
Good luck to the Uber and Lyft drivers striking today. My mom’s husband drives so they can have a little piece of something, and it’s cray how little something they get from those rides. Without those folks using their OWN cars and time, the tech companies would be nada.
— Danez Smith (@Danez_Smif) May 8, 2019
Uber drivers are striking on Wednesday, protesting wages, a lack of regulation and their treatment as private contractors. Lyft LYFT, -5.01% , meanwhile, posted better-than-expected sales, but also massive losses Tuesday, with shares up, though on upbeat comments from executives.
Opinion: Lyft says it won’t offer this key data, insulting investor intelligence
Random reads
One dead, several wounded in a school shooting near Denver, Colorado
President Trump posted huge financial losses to the IRS over 10 years when he was a deal making king, claims NY Times
Everything you ever wanted to know about a health savings account, but were afraid to ask
Brits are no longer among the world’s biggest drinkers, says new study
Auschwitz-themed mini skirts and tote bags. Oh yes
And “Game of Thrones,” the final season turning into a letdown for viewers?
Few shows were hyped as much as Game of Thrones S8. But has the show disappointed viewers? The latest IMDB data suggests yes.
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Ramsay Bolton once declared "If you think this has a happy ending, you haven't been paying attention". That may end up being true. #GameofThrones pic.twitter.com/mAmDbH33fd
— chartr (@chartrdaily) May 8, 2019
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