- China sent the Dow Jones reeling on Friday with a stern response to President Trump’s Hong Kong bill signature.
- December tariffs are now pressuring the stock market once again.
- Dow stocks with China exposure may struggle as the December deadline is now just weeks away, threatening the most crucial consumer spending period of the year.
The Dow Jones fell more than 100 points on Friday after Donald Trump signed a bill supporting the Hong Kong protestors, prompting a sharp response from the Chinese government.
Stock markets rallied slightly off their lows, as signs of a strong Black Friday showing helped to pump Dow retail stocks like Walmart.
Dow Drops as Trade War Angst Returns
All three of the major US stock market indices fell at least 0.4%, as the Dow Jones Industrial Average, Nasdaq, and S&P 500 all priced in the fact that Trump and Xi’s relationship was souring due to the Hong Kong bill.
The Dow closed at 28,051.41 for a loss of 112.59 points or 0.4%. The S&P 500 slid 0.4% in lockstep with the DJIA, while the Nasdaq dropped 0.46%.
Confirming the move from risk, the price of crude oil plummeted 4.5%, while the price of gold rallied 0.65%.
Helping to lift general risk appetite, better than expected unemployment numbers in eurozone powerhouse Germany continued to raise confidence that the European economy might be bottoming out. Things could have been much worse for the Dow if this critical German data had not cushioned the blow.
As China promises a harsh response to the United States’ support of Hong Kong, Dow bulls are nervously eyeing December’s tariffs. With just a few weeks before these levies are planned to go into effect, the US and China’s relationship is worsening at the worst possible time for the Dow Jones.
Stock Market Outlook: Positive Data Expected Next Week
The outlook for the trade war is tied inextricably to the path of interest rates in the United States. Looking ahead to next week, economist James Knightley at ING believes that a healthy data haul should keep the Federal Reserve on hold in December.
Next week’s data should confirm that the Federal Reserve will be on hold in December. Officials had already indicated that they wanted to take stock after three rate cuts implemented since July and with third-quarter GDP being revised higher and the jobs report likely showing a strong rebound in employment (admittedly thanks in large part to the ending of the strike at General Motors) they will have plenty to justify a pause.
Despite this confidence in the near term, Knightley sees plenty to be worried about for investors in 2020. He expects some Dow steadying cuts to come in the new year, stating,
Nonetheless, we remain cautious on the outlook given weak global demand, the strong dollar, and lingering trade tensions. The ISM indices are likely to remind us that growth has slowed, and the manufacturing sector, in particular, is struggling. We still see a strong chance of further rate cuts in early 2020.
Dow 30: Apple and Boeing Fall, Walmart Shines
Nearly all of the Dow 30 stocks were in the red on Friday on a cautious day of trade in the index. Apple and Boeing helped send the Dow Jones lower while plummeting oil prices hurt Chevron and Exxon Mobil.
Consumers are expected to have a strong showing this holiday season, putting stocks like Apple at risk if sales don’t live up to expectations. This was seen last year, when iPhone sales underperformed. AAPL stock will also need to dodge the fresh tariffs, as they would directly affect their bottom line during the crucial Christmas season.
Walmart stock defied the wider stock market downtrend, rallying 0.28% in anticipation of a stellar Black Friday sales haul.
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