US close: Dow closes just two points higher, S&P 500 and Nasdaq losing streak continues
Although they tried to avoid it, opening in the green across the board, US stocks closed mostly lower on Wednesday, extending the S&P 500 and Nasdaq's losing streak to a third straight session on the back of escalating tensions between Washington and Beijing.
At the close, while the Dow Jones Industrial Average was up 0.01% at 25,967.33 at the end of trading, the S&P 500 traded 0.16% weaker at 2,879.42 and the Nasdaq lost 0.26% at 7,943.32.
The Dow closed just two points higher as investor sentiment never really recovered after the White House revealed overnight that it had received a diplomatic cable from Beijing late on Friday containing systematic edits to the pair's nearly 150-page draft trade agreement, threatening to undo months of negotiations between the world's two largest economies.
Donald Trump responded as he always does, on Twitter, announcing an increase to tariffs on Sunday, from 10% to 25%, on $200bn-worth of Chinese goods, including internet modems and routers, printed circuit boards, vacuum cleaners and furniture.
Trump once again took Twitter on Wednesday, saying the Chinese were now "coming to the US to make a deal," indicating he felt they had originally been dragging out negotiations in the hope that the President would be voted out in 2020.
Discussing the market reaction to the news, Kingswood head of research Rupert Thompson said: "Hopes of a US-China trade deal were a major factor behind the sharp rebound in markets this year and with Trump's tariff threat now putting a deal in doubt, it is no surprise equities have taken a hit.
"However, the 2% drop in global equities from their high has to be seen in the context of the 15% gain seen year-to-date prior to Trump’s tweets. It is hard to tell whether the latest ratcheting up of tension is just part of Trump’s negotiating tactics or there has been substantive backtracking by the Chinese to justify his intervention. Either way, it is still in the interest of both parties to reach a deal."
Investors also digested news that Chinese export growth fell back unexpectedly last month and while an acceleration in imports pointed to an improvement in the domestic economy, economists were somewhat divided on the strength one could expect of any rebound.
In US dollar terms the year-on-year rate of export growth dipped by 2.7% in April following a jump of 14.2% in March, which was shy of the consensus forecast for an increase of 3.0%.
Also of note, Iran warned it could stop complying with certain parts of the historic 2015 nuclear deal it signed with the like of the US, UK, France, Germany, China and Russia. The country's President Hassan Rouhani stated he would start stockpiling heavy water and low-enriched uranium unless non-US signatories help shield Iran from White House sanctions aimed at crippling its economy.
On the corporate front, ADRs in automakers Honda and Toyota Motors closed 3.08% and 0.60% lower, respectively, following the release of their quarterly figures, while fast-food chain Wendy's rounded out the session up 3.95% on the back of its own figures.
Ridesharing outfit Lyft tumbled 10.84% after the release of its first quarterly figures since its IPO in March and TripAdvisor sunk 11.41% as a result of its earnings last night.
In data news, US mortgage applications increased 2.7% last week, according to the Mortgage Bankers Association's Weekly Mortgage Applications Survey.