1. Trade war: The 2019 market rally has been impressive. Now it faces a big obstacle: trade tensions. The resumption of the trade war between the United States and China has surprised investors and hit global stocks. The S&P 500 shed 2.2% and the Dow fell 2.1% for the week after President Donald Trump followed through on his pledge to hike tariffs on Chinese goods worth $200 billion. China has said it will retaliate, though both sides are still engaged in negotiations.
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| Where U.S. stocks are now | | | Dow | | Nasdaq | | S&P | | | | | | | YTD +11.21% | | YTD +19.32% | | YTD +14.94% | | | |
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| Key Market Stats | Latest | Today's Change | | | Oil | $61.71 | +0.05 / +0.08% | | | Gold | $1,286.80 | -0.60 / -0.05% | | | 10-yr | 2.46% | -0.00 | | | Euro | $1.12 | 0.00 / 0.00% | | | |
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| News: What you need to know about the markets | | | | | | | The trade war is now the biggest risk to markets | | By Julia Horowitz and David Goldman, CNN Business | | | | 1. Trade war: The 2019 market rally has been impressive. Now it faces a big obstacle: trade tensions. | | | | The resumption of the trade war between the United States and China has surprised investors and hit global stocks. The S&P 500 shed 2.2% and the Dow fell 2.1% for the week after President Donald Trump followed through on his pledge to hike tariffs on Chinese goods worth $200 billion. China has said it will retaliate, though both sides are still engaged in negotiations. | | | | More than any other factor, trade has knocked back US stocks from recent record highs and has the potential to hurt stocks even more. | | | | "The big issue for the market right now is clearly the trade issue," said Ed Yardeni, president of investment advisory firm Yardeni Research. | | | | Back in December — the last time volatility was a major discussion — the market was sent into a panic over slowing economic growth, a hawkish Federal Reserve and unease of US-China relations. | | | | Markets shot back up as those factors appeared to be addressed. The Federal Reserve under Jerome Powell adopted a wait-and-see approach and said it will hold interest rates steady. The global economic picture appeared healthier. And the Trump administration signaled it was moving toward a trade deal with China. | | | | "There's no question what the Fed has done as far as backtracking has been a major boost to the stock market this year," said Peter Boockvar, chief investment officer at Bleakley Advisory Group. | | | | Then came higher tariffs. | | | | "Markets were expecting there to be a deal," said Adam Slater, lead economist at Oxford Economics. "I suspect they may have been overoptimistic on several fronts." | | | | A 10% or 15% correction is a real possibility if the trade war continues to escalate, according to Yardeni. Detrick said US markets may fall 5% in the next month. | | | | Risk is heightened by the fact that the United States is fighting a trade war on multiple fronts. Trump's threat to impose tariffs of 20% on cars from Europe could also come to a head soon, Yardeni noted. | | | | For now, at least, investors will remain focused on talks with China. The consensus is that for the market to continue its run, a resolution is needed soon. | | | | "You just don't want to see the two largest economies in the world at loggerheads for an extended period of time," Boockvar said. | | | | 2. Walmart earnings: Walmart will report earnings on Thursday, and investors will want to know if the company can rein in the massive costs of battling Amazon. | | | | Walmart grew its digital business by about 40% last quarter, as it pumped resources into improving its own website, Jet.com and its online store offerings. But that's proven to be an expensive enterprise, pinching profit. | | | | Also hurting profit: Walmart has given its employees a 50% raise over the past three years, including benefits and bonuses. That's the price Walmart has needed to pay to retain employees during the United States' lowest unemployment in five decades. | | | | 3. Econ watch: The Census Bureau will report US retail sales for April on Wednesday. | | | | The retail industry is turning into a tale of the haves and the have-nots. While Walmart, Amazon, Macy's, Best Buy and Kohl's have adapted well to quickly changing consumer demands, others like JCPenney, Sears have not. | | | | People are still buying stuff, though — they're just buying in different ways and at different places. Economists surveyed by Refinitiv expect retail sales rose 0.2% last month. | | | | The University of Michigan will release its US consumer sentiment report for May on Friday. These reports tend to reflect how consumers digest news. | | | | For example, when the US government shut down in the winter, sentiment fell. But following reports of a stronger-than-expected economy and historically low unemployment, economists surveyed Refinitiv expect sentiment to rise slightly from last month. | | | | | | | |
| | | | | | Monday — Tencent Music earnings
Tuesday — Nissan earnings
Wednesday — Alibaba, Tencent and Macy's earnings; US April retail sales
Thursday — Walmart, Baidu and NVIDIA earnings; VivaTech conference starts in Paris
Friday — US consumer sentiment | | | | | | | |
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