Dow Escapes Market Slump Ahead of Federal Reserve Meeting

The Dow diverged from the weaker U.S. stock market on Monday, as investors turned their attention to the most highly anticipated Federal Reserve meeting in years. Trade talks between the United States and China will resume this week, though a breakthrough in negotiations is highly unlikely, according to various media reports.

Dow Rises; S&P 500, Nasdaq Fall

The Dow Jones Industrial Average was the clear-cut winner on Monday, rising 28.96 points, or 0.1%, to close at 27,221.41. More than half-a-dozen Dow industrials reported gains of 1% or more. Together, they helped offset sharp declines for Pfizer Inc. (NYSE:PFE), Dow Inc. (NYSE:DOW) and Boeing Co (NYSE:BA).

Dow Jones Industrial Average narrowly escapes market slump. | Source: Yahoo Finance.

The broad S&P 500 Index of large-cap stocks edged down 0.2% to 3,020.98. Losses were concentrated in six of 11 primary sectors, led by financials and consumer discretionary companies.

Meanwhile, the technology-focused Nasdaq Composite Index closed down 0.4% at 8,293.33.

U.S.-China Trade Talks to Resume

More than one month after agreeing to halt their trade war, the United States and China are set to resume negotiations on Tuesday for the first time since May. As CNBC reported, neither side is showing any sense of urgency in getting a deal done.

The two-day meeting, which will take place in Shanghai, is not expected to result in “any grand deal,” White House economic adviser Larry Kudlow told CNBC last week. “Talking to our negotiators, I think they’re going to reset the stage and hopefully go back to where the talks left off last May,” he said.

President Trump has warned that China could hold out until after the 2020 election to negotiate a new deal. On Friday, Trump told reporters at the White House that Beijing wouldn’t sign a deal if it had any inkling that he wasn’t going to return as president.

“I don’t think personally China would sign a deal if I had a 2% chance of losing the election,” the president said. “I think China would probably say: ‘Let’s wait. Let’s wait. Maybe Trump will lose and we can deal with another dope, or another stiff.”

All Eyes on the Fed

The Federal Reserve is set to kick off its two-day policy meeting on Tuesday, setting the stage for its first interest-rate cut in over a decade. For the last two months, Wall Street has been pricing in a 25 basis-point reduction to the federal funds rate following the July 30-31 FOMC meeting.

Policymakers initiated four rate hikes in 2018, but that proved costly for an economy that has become overly reliant on cheap debt. Fed Fund futures prices now suggest the central bank will lower interest rates up to 50 basis points this year.

President Trump has repeatedly criticized the Fed for raising interest rates too early and far too aggressively. His desire for more accommodative measures will likely be realized on Wednesday.

Featured image courtesy of Shutterstock. Chart via Yahoo Finance. 

Chief Editor to and Contributor to, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi