Stocks Fall Ahead of Fed Decision; Treasuries Rise: Markets Wrap

(Bloomberg) -- U.S. stocks fell amid a mixed bag of corporate earnings and growing speculation a trade deal with China remains elusive. Treasuries edged lower as the Federal Reserve began deliberating on the path for interest rates.

The S&P 500 Index declined for a second day after President Donald Trump criticized China just as his negotiators start talks in Shanghai. Though, Trump boosted sentiment late in the session when he said he had recently spoken with his Chinese counterpart. Tech shares led losses. In earnings news, retailer Under Armour tumbled after warning about weak sales, while Procter & Gamble and Merck gained on strong results.

The 10-year Treasury yield traded around 2.05% as investors awaited the Fed’s anticipated rate cut Wednesday. The dollar held near a two-month high, while the pound continued its decline amid concerns about a no-deal Brexit. West Texas crude rose above $58 a barrel.

Trump redirected investor angst toward tariffs on China, lashing out at the nation for continuing to “rip off” the U.S. The trade dispute ranks high among the reasons global growth has been flagging enough to prompt the Fed to consider rate cuts. Stocks rose to records just last week as corporate profits came in higher than expected and data showed steady economic growth.

“Trade is the big question mark,” Doug Peta, chief U.S. investment strategist at BCA, said in an interview at Bloomberg’s New York headquarters. “If the tensions were to worsen, if trade were to slow even more, I’d think that that sharp manufacturing slowdown could easily become a manufacturing recession and if it were to spread to the services part of the global economy then it could easily induce a global recession.”

Investors have a lot to digest this week with trade talks, the Federal Reserve, corporate earnings and U.S. jobs data all on their plates. Chinese and American negotiators are kicking off two days of talks in Shanghai on Tuesday, and on Wednesday the Fed is widely anticipated to cut rates. Chairman Jerome Powell’s post-meeting press conference will be scoured for clues on the policy path as signs of slowing growth put pressure on central banks around the world.

Meanwhile, as corporate reporting season rolls on in the U.S., Europe and Asia, traders will be looking for evidence of a slowdown. The latest economic data provide food for thought, showing Japan’s factory output fell more than expected in June and the French economy slowed in the second quarter.

Here are some of the key events to watch as the week unfolds:

• Earnings include: Qualcomm, AMD, Credit Suisse, Nomura, Toyota, Honda, Ferrari, GM, BMW, Rio Tinto, ConocoPhillips, Shell, Vale, GE, Altria.
• Fed officials begin their two-day meeting on monetary policy in Washington Tuesday. Chairman Jerome Powell will hold a press conference following the FOMC’s decision Wednesday.
• The Bank of England policy decision is due Thursday.
• The U.S. July jobs report is due Friday.

Here are the main moves in markets:

Stocks

• The S&P 500 Index fell 0.3% as of 4 p.m. New York time.
• The Dow Jones Industrial Average slid 0.1%.
• The Stoxx Europe 600 Index decreased 1.5%, the biggest decline in three months.
• The U.K.’s FTSE 100 Index declined 0.5%.
• The MSCI Asia Pacific Index advanced 0.1%.

Currencies

• The Bloomberg Dollar Spot Index was little changed.
• The euro gained 0.1% at $1.1152.
• The British pound decreased 0.4% to $1.2166, the weakest in more than two years.
• The Japanese yen increased 0.1% to 108.62 per dollar.

Bonds

• The yield on 10-year Treasuries fell one basis point to 2.06%.
• Germany’s 10-year yield dipped one basis point to -0.40%.
• Britain’s 10-year yield declined one basis point to 0.64%, the lowest in about three years.

Commodities

• West Texas Intermediate crude advanced 2.4% to $58.24 a barrel, the highest in two weeks.
• Gold rose 0.3% at $1,430.75 an ounce.

--With assistance from Andreea Papuc, Laura Curtis, Robert Brand and Sarah Ponczek.

To contact the reporters on this story: Randall Jensen in New York at rjensen18@bloomberg.net;Vildana Hajric in New York at vhajric1@bloomberg.net

To contact the editors responsible for this story: Jeremy Herron at jherron8@bloomberg.net, Samuel Potter

©2019 Bloomberg L.P.