Investors Wary Amid Uncertainty Surrounding Trade Talks…..

U.S. equities declined amid tempered optimism of a U.S.-China trade deal with talks set to resume in Washington this week, as the U.S. blacklist of some of China’s tech companies is one of the issues that is adding another wrinkle to the upcoming meeting. Treasury yields were mostly lower amid the dampened trade optimism and as U.S. wholesale price inflation unexpectedly declined and small business optimism slipped, while the U.S. dollar inched higher, gold gained ground, but crude oil prices ticked lower. In equity news, Domino’s Pizza missed the Street’s forecasts and Dow member Boeing came under pressure amid its prolonged 737 MAX aircraft grounding and as Southwest Airlines’ Pilots Association announced that it has filed a lawsuit against the company.

The Dow Jones Industrial Average (DJIA) fell 314 points (1.2%) to 26,164, the S&P 500 Index lost 46 points (1.6%) to 2,893 and the Nasdaq Composite decreased 133 points (1.7%) to 7,824. In moderate volume, 803 million shares were traded on the NYSE and 1.9 billion shares changed hands on the Nasdaq. WTI crude oil nudged $0.12 lower to $52.63 per barrel and wholesale gasoline gained $0.01 to $1.58 per gallon. Elsewhere, the Bloomberg gold spot price increased $10.34 to $1,503.84 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was up 0.2% at 99.13.

The Producer Price Index (PPI) showed prices at the wholesale level in September declined 0.3% month-over-month (m/m), below the Bloomberg forecast calling for it to match August’s unrevised 0.1% rise. The core rate, which excludes food and energy, also declined 0.3% m/m, versus expectations calling for a 0.2% increase and compared to August’s unadjusted 0.3% increase. Y/Y, the headline rate was 1.4% higher, versus projections to match August’s 1.8% increase. The core PPI rose 2.0% y/y last month, south of estimates calling for an unchanged reading from August’s unrevised 2.3% gain.

The National Federation of Independent Business (NFIB) Small Business Optimism Index for September declined to 101.8 from August’s unrevised 103.1 level, and expectations of a decrease to 102.0. NFIB President and Chief Executive Officer (CEO), Juanita Duggan noted, “As small business owners continue to invest, expand, and try to hire, they’re doing so with less gusto than they did earlier in the year, thanks to the mixed signals they’re receiving from policymakers and politicians,” adding that “All indications are that owners are eager to do more, but they’re uncertain about what the future holds and can’t find workers to fill the jobs they have open.”

Treasuries were mostly higher, as the yield on the 2-year note was down 5 basis points (bps) to 1.41%, the yield on the 10-year note lost 2 bps to 1.53%, while the 30-year bond rate was flat at 2.04%. Volatility in the markets has ramped up after last week’s disappointing manufacturing and non-manufacturing data that exacerbated recession concerns and boosted expectations of further Fed rate cuts this year, but concerns were countered somewhat by Friday’s mixed September nonfarm payroll report.

©2019 Charles Schwab & Co., Inc., Member SIPC. All rights reserved.

Schwab Center for Financial Research (“SCFR”) is a division of Charles Schwab & Co., Inc. The information contained herein is obtained from third-party sources and believed to be reliable, but its accuracy or completeness is not guaranteed. This report is for informational purposes only and is not a solicitation, or a recommendation that any particular investor should purchase or sell any particular security. The investment information mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision. All expressions of opinions are subject to change without notice in reaction to shifting market conditions.