Wall Street Holds Steady Amidst US-China Trade Agreement speculation and Inflation Data
Financial sectors showing measured responses to bilateral accords with China
In what can be considered a cautious reaction, Wall Street remained relatively unchanged on Wednesday, despite a US-China framework agreement and positive inflation data. Traders expressed their disappointment as the trade deal between the world's two largest economies fell short of their expectations.
The Dow Jones Index held steadfast at 42,866 points, while the S&P-500 and Nasdaq indices dropped by 0.3% and 0.5% respectively. Contrary to anticipation, the outcome of the two-day negotiations in London seems to have been a weak framework agreement, unlikely to surpass the previous Geneva agreement which endured for a brief period only.
Adding to the disappointment, China reportedly plans to limit rare earth export licenses to six months. This move has raised concerns as rare earth materials play a critical role in high-tech industries. US President Donald Trump clarified the agreement has yet to be signed by both leaders, adding to the uncertainty. However, he also stated the US would receive 55% tariffs, while China would get 10%, creating a complex tariff structure that leaves many questioning the potential impact on trade dynamics.
Richard Clarida, former Fed representative and current Pimco advisor, expressed his concern, stating, "Politics is now driving the economy, especially in the US, and increasingly in the reactions of other countries." The lack of clarity in the agreement also fueled skepticism on Wall Street.
Meanwhile, positive inflation data in the US, with consumer prices rising less than expected in May, led to a drop in long-term US Treasury bond yields, causing a decline in the dollar. Gold prices rose along with the yields, with added tailwinds from the dollar's weakness.
Stock Market Movers and Shakers
In other news, the Tesla stock ended the day with a narrow gain, despite Elon Musk admitting his recent attacks on President Trump were "too far" potentially alleviating concerns about potential retaliation. Musk also announced the launch of the long-awaited robotaxi service on June 22. Despite a rollercoaster ride during the session, Tesla managed to close with a 0.1% gain.
Meta Platforms shares fell 1.2 percent as the company is reportedly in advanced talks to invest around $14 billion in Scale AI and hire its CEO for their AI development. Lockheed Martin shares dropped 4.2 percent following news that the U.S. Air Force plans to order significantly fewer F-35 fighter jets in 2024. GameStop, the video game retailer, reported declining sales in the quarter but still managed to turn a profit, with its stock falling 5.4 percent.
However, General Motors shares rose 1.9 percent as the automaker plans to invest $4 billion in increasing production in the U.S. and reducing tariff burdens. First Solar shares increased 2 percent following an upgrade to "buy" by Jefferies. Starbucks saw a 4.4 percent boost in its stock price as former and influential CEO, Howard Schultz, showed support for the coffee chain's turnaround plan.
Source: ntv.de, ino/DJ
- Wall Street
- ** Stock Prices**
- Tariffs
- Rare Earth Exports
- Trade Agreements
- Consumer Prices
- Inflation Data
- Tesla
- Meta Platforms
- Lockheed Martin
- GameStop
- General Motors
- First Solar
- Starbucks
Wall Street's cautious reaction on Wednesday was influenced by the weakening framework agreement between the US and China, the limited rare earth export licenses in China, and the lack of clarity in the trade agreement, causing stocks like Tesla, Meta Platforms, Lockheed Martin, and GameStop to experience fluctuation. On the other hand, investors might see potential in businesses like General Motors and Starbucks, given their plans to increase production in the US and turnaround plan, respectively. The positive inflation data in the US caused a decline in long-term US Treasury bond yields, affecting both the dollar and gold prices.
