The Dow Fell 28 Points Because Trade Trumps Impeachment

The main U.S. stock indexes ended slightly lower on Tuesday amid trade news on two fronts

The main U.S. stock indexes ended slightly lower on Tuesday amid trade news on two fronts

Muted Response. The main U.S. stock indexes ended slightly lower on Tuesday amid trade news on two fronts. U.S. and Chinese trade negotiators are reportedly planning for a delay in tariffs due to take effect on Sunday, while Democratic lawmakers reached an agreement with the Trump administration to support a trade deal with Mexico and Canada. House Democrats also announced two articles of impeachment against President Donald Trump. At the same time, the Federal Reserve kicked off its December meeting on Tuesday. In today’s After the Bell, we…

Two Trade Stories

Stocks were largely trading flat on Tuesday. The Dow Jones Industrial Average slipped 27.88 points, or 0.10%, to 27881.72. The S&P 500 fell 3.44 points, or 0.11%, to 3132.52, and the Nasdaq Composite lost 5.64 points, or 0.07%, to 8616.18.

The Wall Street Journal reported today that U.S. and Chinese trade negotiators are laying the groundwork to delay a fresh round of tariffs on $165 billion worth of Chinese imports set to kick in on Dec. 15. Officials in both Beijing and Washington have signaled, according to the paper, that even if President Trump has set for tariffs to increase on Dec. 15, it’s not a hard deadline for the so-called “phase-one” trade deal and can be extended.

Washington is demanding that China commit to massive purchases of U.S. farm products, with a quarterly review of promised purchases. Beijing wants immediate tariff relief in return for any upfront commitments for agriculture purchases.

On a different front, House Democrats have finally agreed to support the new U.S. trade deal with Mexico and Canada–three years after President Trump pledged to remake the North American Free Trade Agreement during his 2016 election campaign. The U.S.-Mexico-Canada Agreement, or USMCA, had long been supported by Republicans, but opposed by Democrats over concerns about labor and environmental provisions.

As Capitol Hill is divided over Trump’s impeachment inquiry, the Democratic approval of the deal marks a rare bipartisan agreement on economic policy. At a Tuesday news conference, House Speaker Nancy Pelosi called the new pact a “victory for American workers,” which contains provisions aimed at creating more manufacturing jobs in North America. The deal still needs to be voted and ratified by the House–likely by next week–and passed by the Senate.

The new deal could benefit automobile companies including General Motors (GM), Ford Motor (F), and Tesla (TSLA), as well as auto parts suppliers such as Canadian giant Magna International (MGA) and Michigan-based BorgWarner (BWA). The new deal also includes provisions to open trade in agricultural goods, which should help companies like French food giant Danone (DANOY) and U.S. chicken producer Tyson Foods (TSN). Other companies likely to benefit from the deal include railroad network Kansas City Southern (KSU) and oil refiners like Marathon Petroleum (MPC).

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The Federal Reserve kicked off its two-day December policy meeting on Tuesday and will conclude tomorrow with the release of its latest policy statement. After the Fed made meaningful pivot this year with three rate cuts at each of the last three meetings, investors appear to believe that the central bank will hold U.S. interest rates steady between 1.5% to 1.75% as it gauges the impact of the recent cuts and the state of the economy.

Still, Fed officials will release their quarterly forecasts for longer-term growth and interest rates. Their discussion during the meeting should offer some clue about the central bank’s next move on rates and future policy focus. Fed Chair Jerome Powell has described this year’s three rate cuts as a “mid-cycle adjustment,” which suggests the central bank might go back to the regular course of raising rates after this year’s pause. But according to CME data, most investors are betting that the Fed will either lower rates again or keep them at current levels in the coming 2020.

Write to Evie Liu at evie.liu@barrons.com

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.