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May 10, 2019

Futures Indication | Dow set to decline at Friday open as increased tariffs on Chinese goods kick in

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Traders work on the floor at the New York Stock Exchange.
Brendan McDermid | Reuters
Traders work on the floor at the New York Stock Exchange.
Shares on Wall Street were poised for losses at Friday's stateside open, as U.S. tariffs on Chinese goods were increased shortly after the stroke of midnight ET.
Dow Jones Industrial Average futures slipped, implying an opening decline of nearly 23 points for the index at Friday's open. Futures also pointed to opening declines for the S&P 500 and Nasdaq.
Traders are hopeful that the new tariffs are not applied to Chinese exports that are already in transit before the deadline, which provides some additional time for the two sides to reach an agreement.
Futures had been wavering between positive and negative territory on Thursday evening following news that trade talks between the U.S. and China would continue on Friday — implying no deal had been struck before the midnight deadline for increased tariffs.
Chinese Vice Premier Liu He met with top U.S. trade officials Thursday evening in Washington, just hours before the new tariffs were to go into effect. President Donald Trump had set a 12:01 ET Friday deadline to slap higher tariffs — from 10% to 25% — on $200 billion worth of Chinese goods. Trump later suggested that the White House could reverse that decision, based on progress in negotiations.
Hours before the meeting Thursday, the president said tariffs are an "excellent" alternative to a trade deal with China.
"This hardline turn by the U.S. was certainly a nasty (if not an entirely unpredictable) surprise for markets, which now may have to contend with heightened trade tensions for longer than anticipated," Hannah Anderson, global market strategist at J.P. Morgan Asset Management, wrote in a note.
Stocks extended this week's major sell-off on Thursday. The Dow Jones Industrial Average has fallen more than 650 points this week, while the S&P 500 has lost about 2.5% following the president's Sunday tweet threatening tariff hikes.
On Monday, stocks shook off the president's weekend tweet as a mere negotiation tactic. But tougher rhetoric by top U.S. trade representative Robert Lighthizer weighed on major indexes.
Markets again seesawed after the president said it was possible to get a trade deal with China this week. The Dow fell nearly 450 points at its intraday low on Thursday before cutting losses and ending the day just 138 points down.
"This episode highlights that trade tensions are not truly resolved until a deal is signed, sealed and delivered. Meanwhile, the extent of the selloff in the last few days is evidence that consensus market expectations can be wrong, especially when investors rely more on rumor than fact," Anderson said.
The Cboe Volatility Index, a measure of the 30-day implied volatility of the S&P 500 that's commonly known as Wall Street's "fear gauge," hit its highest level since Jan. 4 on Thursday

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