U.S. Stocks Finish Lower as China Shows Signs of Life for all the Wrong Reasons

The U.S. stock market finished mostly lower on Wednesday, as investors wrestled with mixed Chinese data and a slew of corporate earnings.

S&P 500, Nasdaq Head for Losses

Plunging health stocks weighed on the S&P 500 Index just one day after UnitedHealth Group Inc. (UNH) warned investors about a new legislative proposal by House Democrats to extend Medicare for all. The large-cap index declined 0.2% to finish at 2,900.45.

The Nasdaq Composite Index fell 0.1% to 7,996.08 despite modest gains reported for technology stocks. The tech-focused index climbed back above 8,000 earlier this week for the first time since October.

Meanwhile, the Dow Jones Industrial Average closed at 26,449.54, where it was virtually unchanged.

Chinese Economy Shows Life, but Underlying Risks Remain

China’s economy is holding up better than expected, with retail sales, industrial production and property investment surprising to the upside during the most recent quarter. However, it’s precisely this uncontained growth in real estate that is hindering the country’s long-term potential.

Gross domestic product (GDP), the value of all goods and services produced in the economy, expanded 6.4% annually in the first quarter, the National Bureau of Statistics reported Wednesday. That matched the prior quarter’s growth rate and was just ahead of forecasts calling for 6.3%. Property investment surged 11.8% in the first three months of 2019, the highest year-over-year gain in more than four years.

The surge in property investment exacerbates what many consider to be one of China’s biggest problems: a housing bubble that is growing out of control. The housing boom has also shifted manufacturing resources away from other segments of the economy toward housing, a move that The Wall Street Journal says could undermine the country’s long-term growth prospects.

U.S.-China Trade Deal in the Works?

The Wall Street Journal also reported Wednesday that China and the United States are nearing a comprehensive trade deal, with both sides expected to resume face-to-face negotiations later this month.

Under the proposed schedule, U.S. Trade Representative will travel to Beijing in the week of April 29. A Chinese envoy led by Vice Premier Liu He will then make a return trip to Washington the following week. According to WSJ, both sides are aiming to hold a signing ceremony by the end of May or first week of June.

Talks have been progressing favorably since the start of the year, prompting President Trump to extend the negotiating window beyond the initial deadline of March 1. That was when the three-month trade truce between Presidents Trump and Xi Jinping was set to expire.

Earlier this week, Hacked reported that the Trump administration was prepared to make big concessions on Chinese industrial subsidies in an effort to bring both sides closer to an agreement. Treasury Secretary Steven Mnuchin told an International Monetary Fund (IMF) media briefing this weekend that he is “hopeful” that negotiators were approaching a final leg in their deliberations. Read more: U.S. Stock Rally Grinds to a Halt as Disappointing Financial Results Offset Trade Optimism.

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