May 17, 2021

The Wall Street stock market falls 3% after deflating the enthusiasm for the truce between the US and China | Economy

The Wall Street stock market falls 3% after deflating the enthusiasm for the truce between the US and China | Economy



Wall Street continues to walk along a very thin line, after two months of intense volatility. The enthusiasm that followed the supposed truce between the United States and China on the commercial front, it suddenly evaporated when the S & P 500 registered a sharp fall that exceeded 3% and that on the Nasdaq was almost 4%. To the doubts on the direction that the discussions will take was added the fear to the deceleration of the economy.

The Dow Jones lost 800 points, 3.1%, at the close and was struggling again to maintain the level of 25,000 points, which does not finish taking off. The interest rate curve in the two and ten year Treasury bonds, meanwhile, continued to move closer. If they are reversed, it is a trend that in the past was associated with the proximity of a recession, which would anticipate a correction in the stock market.

The trigger for the turbulence on Tuesday was a series of messages from Donald Trump on his Twitter account about the pact with Xi Jinping at the G20 summit. Nor did the comments of John Bolton, the hawk of National Security, on intellectual property help. The market, meanwhile, tries to rebalance itself by anticipating a scenario with a more modest growth in 2019.

The time will say after the three months of truce agreed there is some kind of progress that can lead to an agreement. The caution ballasted the values ​​of industrial multinationals such as Caterpillar and Boeing because of the combined effect of uncertainty in the commercial battle and the economy. The doubts were also spread by the technological ones, such as Amazon, Apple, Microsoft and Google.

The markets will be closed on Wednesday in the US as a sign of mourning for the death of former President George H.W. Bush. The attention of the investors will be directed to the employment data published on Friday. The indicator is key for the Federal Reserve. It is expected that the US central bank will raise rates again within two weeks, which will be the third in 2018. They are currently between 2% and 2.25%.

In parallel, executives of the major car manufacturers went through the White House on Tuesday to talk about the investments they are making in the US and the alliances that are forming with domestic brands to better manage capacity. But although the threat of tariffs seems to relax, they make it clear that these investments are dependent on market conditions.

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