U.S. Stocks Backtrack as Trump Administration Signals China Trade Talks Will Resume Next Week

The U.S. stock market reversed course Tuesday afternoon, falling from five-month highs after shares of utilities and financials companies plunged. The Federal Reserve’s policy-setting board kicked off its two-day meeting in Washington as the Trump administration signaled for the resumption of China trade talks next week.

Dow Falls Back Below 26,000

All of Wall Street’s major indexes faced pressure in afternoon trading, with the Dow Jones Industrial Average backtracking from a peak of 26,109.68, which was some 840 points shy of its record high. The Dow 30 index settled down 26.72 points, or 0.1%, at 25,887.38.

The broad S&P 500 Index pared losses to finish flat at 2,832.57. Losses were concentrated in seven of 11 primary sectors, with utilities plunging 1.2%. Shares of financials companies fell 0.8% and industrials were off by 0.4%.

The technology-focused Nasdaq Composite Index managed to hold onto gains, climbing 0.1% to 7,723.95.

U.S.-China Trade Talks to Resume Next Week

The United States and China are planning new rounds of trade negotiations starting next week amid reports that Beijing was backtracking on some of its concessions, upping the ante on both sides to finalize a new agreement. According to The Wall Street Journal, U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin will travel to Beijing in the week of March 25 to meet with Chinese Vice Premier Liu He. Liu will then make a return trip to Washington, D.C. the following week.

The planned negotiations are consistent with a previous timetable set forth by President Trump, who said earlier this month that we should know more about the likelihood of a comprehensive agreement in three or four weeks. Although talks had progressed favorably in February, there has been virtually nothing new to report this month. As WSJ noted, both sides are aiming to get a final deal in place by the end of April.

Getting a deal finalized soon is seen as critical for Trump’s reelection bid in 2020. China’s industrial policy is one of the biggest issues stalling negotiations, as the Trump administration asserts that Beijing provides an unfair advantage to domestic firms. Meanwhile, China says it hasn’t received convincing assurances from Washington that tariffs will be lifted.

Fed Meeting Underway

Investor focus on Tuesday was largely fixated on the U.S. central bank, with the Federal Reserve beginning its two-day policy meeting in Washington. The Federal Open Market Committee (FOMC) is expected to keep interest rates on hold this month but could adjust its quarterly economic projections in light of the apparent slowdown in global economic growth.

Both the International Monetary Fund and Organization of Economic Cooperation and Development have downgraded their forecast for the global economy, citing ongoing trade risks and renewed weakness in the Eurozone. This is beginning to impact the U.S. economy, where GDP growth has slowed significantly in recent quarters.

The Fed will deliver its interest rate verdict along with a revised summary of economic projections Wednesday afternoon at 2:00 p.m. ET. Markets will be attuned to the central bank’s “dot plot” chart of interest rate expectations, which show how many rate adjustments are anticipated in the short, medium and long terms.

Featured image courtesy of Shutterstock. Chart via Stockcharts.com.

Chief Editor to Hacked.com and Contributor to CCN.com, 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