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Stocks End Down as Trade War Fears, Weak Retail Sales Overshadow Strong Earnings

Here Are 3 Hot Things to Know About Stocks Right Now

  • The Dow Jones Industrial Average finished lower Wednesday as investors divided their attention between strong third-quarter earnings and worries over weak U.S. retail sales and the ongoing U.S.-China trade war.
  • Bank of America (BAC) climbed after the financial services company posted stronger-than-expected third-quarter earnings. Bank of America is Real Money’s Stock of the Day.
  • Abbott Laboratories (ABT)  was slightly lower after the medical device company posted third-quarter earnings that were largely in-line with Wall Street forecasts but narrowed its full-year profit forecast.

Wall Street Overview

Stocks ended mixed Wednesday in choppy trading as investors divided their attention between strong third-quarter corporate earnings and worries about weak U.S. retail sales and the ongoing U.S.-China trade war.

The Dow Jones Industrial Average fell 23 points, or 0.08%, to 27,002, the S&P 500 slipped 0.20%, and the Nasdaq dropped 0.30%.

ExxonMobil (XOM) , Chevron (CVX) and Microsoft (MSFT) were among Dow’s biggest decliners.

The U.S. House of Representatives unanimously approved four pieces of legislation backing pro-democracy protests in Hong Kong, a move that China described as having “sinister intentions” and that were designed to curtail its broader economic growth.

Should China retaliate to the U.S. measures passed Tuesday evening — which
The pro-democracy measures still need Senate approval. If they do, and if China retaliates, the fragile truce on trade and tariffs reached last week in Washington could be jeopardized.
President Donald Trump said Wednesday that trade agreement probably won’t be signed until he meets with Chinese President Xi Jinping in Chile next month. He said the agreement was currently being worked on.
Meanwhile, The Wall Street Journal reported there were questions about how much more in U.S. agricultural products China will actually buy and for how long, while Bloomberg said China wants U.S. tariffs on Chinese goods rolled back before moving forward with the purchases.
U.S. retail sales fell in September for the first time in seven months, the Commerce Department said, dropping 0.3% and missing analysts’ expectations of a 0.3% increase. Retail sales in August were revised to show a 0.6% increase from an original 0.4% reading. A year ago, retail sales increased by 4.1%.

Ian Shepherdson, chief economist with Pantheon Macroeconomics, said that the retail figure was likely to be revised upward. The data, he noted, “are hard to square with the Redbook chainstore sales survey, which clearly suggests that September sales accelerated, presumably as people brought forward purchases in anticipation of higher prices in the wake of the tariffs on a wide range of consumer goods.”

“But the retail sales numbers are biased to the downside at the initial print,” he said, “upward revisions are more common than downward, and (Wednesday’s) numbers look prime candidates to be moved higher.”

“The good news from today’s read is the upward revision from last month,” said Mike Loewengart, vice president of investment strategy with E*Trade. “”It is concerning however that this month is in the red and significantly cooler than expected since retail sales is a significant driver of the economy. While retail sales are certainly subject to seasonal fluctuations, this is the first negative read since February. On the heels of the IMF slashing global growth forecasts, this could be another signal of the very real implications the trade war has had on global economies.”

In addition, the NAHB index of homebuilder activity and sentiment rose to 71 in October from 68 in September, beating the consensus forecast for no change.

“The consensus was very hard to square with the rising trend in both mortgage demand and new home sales, and we are not surprised to see the NAHB index rising to a 20-month high,” Shepherdson said. “Housing is set to be the strongest part of the economy for some time, but it is just not big enough to offset the impending rollover in business capex and exports.”

The years-long effort by the U.K. to leave the European Union with an exit agreement saw a potential breakthrough as talks extended into a third consecutive day with the aim of bringing a complete text to EU leaders later this week in Brussels. Many questions remain unanswered, however, before the Brexit deadline of Oct. 31.

General Motors (GM) jumped 1.1% to $36.65 after the United Auto Workers said it had reached a tentative agreement to end a month-long strike at the country’s biggest carmaker. The deal, which will now be voted on by the UAW leadership in the next 24 hours, would then be sent to the UAW rank-and-file for final approval.

Bank of America (BAC) climbed 1.5% to $30.18 after the financial services company posted stronger-than-expected third quarter earnings. Bank of America is Real Money’s Stock of the Day.

Abbott Laboratories (ABT) dipped slightly to $81.78 after the medical device company posted third quarter earnings that were largely in-line with Wall Street forecasts Wednesday, but narrowed its full-year profit forecast.

Johnson & Johnson (JNJ)  gained 1.8% to $135.17 amid reports the drug manufacturer could be close to agreeing to a multi-billion dollar settlement with state attorneys general over its role in the nation’s opioid crisis..

In addition, the Wall Street Journal reported that three pharmaceutical companies controlling around 85% of the U.S. prescription drug market — McKesson (MCK) , Cardinal Health (CAH) , and AmerisourceBergen (ABC) — were close to a deal that would see them pay $18 billion over 18 years to cover liabilities stemming from nearly 5,000 pending state and federal lawsuits. All three companies saw their shares rising.

Streaming giant Netflix (NFLX)  jumped in after-hours trading after the streaming giant reported its latest financial results.