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June 23, 2020In comments made to WSJ, Navarro attempts to walk back earlier statements that the trade pact was ‘over’; Trump confirms trade deal intact
U.S. stock-index futures were headed higher Tuesday morning, recovering from a shock lower when White House trade adviser Peter Navarro implied to Fox News in a late-Monday interview that a hard-fought trade agreement that was signed with China in January had been terminated by President Donald Trump.
Later, Navarro said his comments were “wildly” taken out of context and the phase-one pact remained in force. Trump also tweeted that the agreement was intact.
How are benchmarks performing?
Futures for the Dow Jones Industrial Average YM00, 0.81% YMU20, 0.80% were up 232 points, or 0.9%, at 26,185, but had touched an overnight low at 25,514, according to FactSet data. Those for the S&P 500 index ES00, 0.69% ESU20, 0.68% were up 25.30 points, or 0.8%, at 3,136, but had traded at as low as 3,060. Nasdaq-100 futures NQ00, 0.58% NQU20, 0.59%, meanwhile, advanced 68.25 points, or 0.7%, at 10,193.
On Monday, the Dow DJIA, +0.59% advanced 153.50 points, or 0.6%, to end at 26,024.96. The S&P 500 SPX, +0.65% rose 20.12 points, or 0.7%, to finish at 3,117.86, while the Nasdaq Composite COMP, +1.10% picked up 110.35 points, or 1.1%, closing at a record high of 10,056.47, while booking its seventh day in a row of gains and clinching its longest win streak since Dec. 26, 2019, according to Dow Jones Market Data.
What’s driving the market?
Signs of economic recovery amid reopenings from coronavirus-induced lockdowns are what have driven the market higher in recent trade, but the sensitivity of the market to China-U.S. trade developments and the concentration of technology-related companies propelling the market higher is drawing increased attention on Wall Street.
Markets got a jolt of late-night volatility after Navarro, in a Monday evening interview on Fox News, said the China trade deal was over, citing unnamed intelligence officials that allegedly point to a Wuhan laboratory as the source of the novel strain of coronavirus that results in COVID-19.
“Here’s the turning point,” Navarro told Fox host Martha MacCallum on “The Story.” “They came here on January 15th to sign that trade deal, and that was a full two months after they knew the virus was out and about,” he said.
Here’s an excerpt of the exchange on Fox: “The president…he obviously really wanted to hang onto this trade deal, as much as possible, he wanted them to make good on the promises, because there had been progress made on that trade deal. But given everything that’s happened and all the things you just listed, is that over?”
“It’s over, yeah,” Navarro said.
Minutes later, the adviser said that his comments were “taken wildly out of context.” They had nothing at all to do with the phase-one trade deal, which continues in place, he told the Wall Street Journal. “I was simply speaking to the lack of trust we now have of the Chinese Communist Party after they lied about the origins of the China virus and foisted a pandemic upon the world,” he was quoted as saying.
Trump also said via Twitter Monday night that the China trade was “fully intact.”
“Hopefully they will live up to the terms of the agreement!” he wrote. The China Trade Deal is fully intact. Hopefully they will continue to live up to the terms of the Agreement!
The Trump administration has long blamed China of mishandling the COVID-19 outbreak.
The market’s reaction to the news, sinking futures and knocking around Chinese equities and the yuan USDCNY, -0.03% USDCNH, +0.01% in Tuesday Asian overnight trade, underscore the uncertainty and fragility of the Sino-American relationship.
“It appears this administration is ever so confused as the President says one thing and [his] trade advisor says another,” wrote Peter Cardillo, chief market economist at Spartan Capital Securities, in a daily research note.
“We believe, theses type’s of uncertainties could lead to another round of unsettled markets in spite of the Fed’s printing presses working at full speed,” he said referring to the Federal Reserve efforts to stimulate financial markets in the throes of the COVID-19 pandemic.
Meanwhile, the The Nasdaq Composite’s advantage over the Dow and S&P 500 is the biggest since 1983, while the divergence between the S&P 500 and the Dow is widest since 2002, according to Dow Jones Market Data, highlighting the strength of a handful of stocks, including Apple AAPL, +2.61%, Microsoft M, +2.90%, Facebook FB, +0.18%, Amazon.com AMZN, +1.45%, and Google-parent Alphabet GOOGL, +1.82% GOOG, +1.40%.
In economic reports, the preliminary results for the June surveys of American purchasing managers, due to be released at 9:45 a.m. Eastern Time, are likely to show that a contraction in the manufacturing and services sectors is easing. Purchasing managers index for the eurozone—a measure of activity in the manufacturing and services sectors—rose to 47.5 in June from 31.9 in May to reach its highest level since February, the month before lockdowns began in Europe.
Investors are also looking ahead to the release at 10 a.m. of a report on new home sales for May, as well as a report on manufacturing activity in the Fed’s Richmond region.