MarketWatch – Stocks struggle for direction as trade uncertainty remains a driving force

Target falls after results


U.S. stocks swung between gains and losses on Tuesday as investors continued to debate the potential impact of a trade war in the wake of President Donald Trump announcing a pair of tariffs, a strategy that has received opposition from key Republicans like House Speaker Paul Ryan.

What are the main benchmarks doing?

The Dow Jones Industrial Average DJIA, -0.54% slipped 85 points, or 0.4%, to 24,778. The S&P 500 SPX, -0.26% was down 5 points, or 0.2%, to 2,712. The Nasdaq Composite Index COMP, -0.14%  was up 2 points to 7,332. All three opened higher but retreated from their highs of the session in midday trading.

Equity benchmarks are coming off a rally in the previous session, when they closed more than 1% higher in what some called a technical rebound after a stretch of weakness for equities.

Opinion: This technical chart says the stock market is headed for another big drop

What is driving the markets?

Trade continued to be a primary focus for investors, especially as Trump’s plan to impose tariffs on steel and aluminum imports showed signs of opposition. Speaker of the House Paul Ryan warned about the potential fallout if Trump pressed ahead—part of a show of resistance by some Republicans to the plan. In addition, Trump himself appeared to show some willingness to be flexible on trade tariffs with Canada and Mexico, if they agreed to a “fair” North American Free Trade Agreement.

Stocks have recently been pressured by the prospect of more protectionist trade policies, a headwind that contributed to heavy losses in the major U.S. indexes last week.

In a positive development, South Korea’s presidential office said that North and South Korea would hold their first summit in more than a decade in late April. That comes after North Korean leader Kim Jong Un met with a senior delegation from the South in Pyongyang and said he wanted to “write a new history of national reunification” for the two countries.

The reports said North Korea will suspend weapons testing during the summit and would be open to talks with the U.S. about scrapping nuclear weapons and normalize ties.

Read: Here’s what the 30 Dow industrials companies say about a potential trade war

What are strategists saying?

“It was hard to evaluate what negative impact the Korea situation was having on the market, if any, but the possibility of war risk in Asia was the biggest uncertainty out there, and [the summit] could help eliminate that. Even if the risk seemed remote, that’s a net positive for the market,” said George Schultze, a hedge-fund manager and founder of Schultze Asset Management.

“Meanwhile, it seems like investors are starting to suspect that Trump’s tariff announcement could just be an opening gambit in his renegotiations over Nafta, so the threat may not be as bad as some are fearing.”

Despite that, he noted that “we’ve already seen a big run” in equities, suggesting further gains at current levels may be difficult to come by absent new positive news.

What’s on the economic lineup?

A group of Federal Reserve speakers will be watched by investors. Dallas Fed President Rob Kaplan said he still expects three interest-rate increases this year, and that he wants to get started soon. Recent volatility in the market has come as investors fret that inflation could be returning to the economy, and that the Fed could have to become more aggressive in combating such a scenario. However, most investors interpret a more aggressive stance as four rate increases this year.

After the market close, Fed Gov. Lael Brainard will speak on the economy and monetary policy at the Money Marketeers Forum in New York at 7 p.m. Eastern. Later, Kaplan will take part in a moderated discussion at CERA Week, an annual energy conference, in Houston at 8:30 p.m. Eastern.

Read: Trump, trade wars, inflation: Wall Street on edge ahead of February jobs report

What stocks are active?

Target Corp. TGT, -3.53%  slipped 3.9% despite reporting quarter revenue that came in ahead of analyst expectations.

United Parcel Service IncUPS, +0.75%  rose 1.2% after Stifel Nicolaus upgraded the stock, citing its valuation and dividend yield.

Marinus Pharmaceuticals Inc. MRNS, -16.93%  slumped 15% after it reported a 2017 loss that was wider than expected.

CommerceHub IncCHUBA, +23.15%  agreed to be bought by private-equity firm Sycamore Partners in a cash deal valued at $1.1 billion. The stock spiked 23%.

Energy stocks were among the strongest, with the sector up 0.2%. The industry was supported by a 1.3% rise in the price of natural gas. Among the biggest gainers in the energy sector, Baker Hughes, a General Electric CoBHGE, +0.29%  rose 0.6% while Schlumberger LtdSLB, +0.02%  was up 0.6%. Dow component Chevron Corp.CVX, +0.31%  rose 1%.

On the downside, both the financial and the health-care sectors fell 0.5%. Wells Fargo & Co. WFC, -1.23%  fell 1.3% while Citigroup IncC, -0.69%  was down 0.7%.

Read: Qualcomm meeting on hold, but Broadcom drama still heats up

What are other markets doing?

Along with stock futures, European stocks SXXP, +0.35%  were trading firmly higher. Asian markets also jumped across the board, led by a 2% rise for the Hong Kong Hang Seng Index HSI, +2.09%

In other assets, the ICE Dollar Index DXY, -0.55%  slipped 0.4% to 89.771, while crudeCLJ8, -0.19%  was up 0.5% to $62.91 a barrel and gold prices GCJ8, +1.51%  gained 0.6% to $1,327.90 an ounce.

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