Wall Street Slide as Optimism Fades

By Joyce Yu

Philadelphia, PA–Wall Street fell on Wednesday amid rekindled Sino-U.S. trade worries and a slew of soft data. Analysts  expect a bumpy ride for U.S. stocks ahead of a Federal Reserve report that would be watched for cues on pace of future interest rate hikes.

The Dow, which opened higher on Tuesday, lost nearly 200 points at close following the president’s remarks that he was “not satisfied” with trade talks with China. He further commented that the current track appeared “too hard to get done”. Adding further pressure to the stocks today is the disappointing earnings from Lowe’s and Target which missed targets for both their revenue and earnings.

“It’s basically removing what we were given on Monday: that the enthusiasm that the Sino-American relationship was healing by the way of the U.S. and China agreeing on some format to solve the trade dispute,” said Mark Luschini, chief investment strategist at Janney Montgomery Scott.

“Not only are the trade negotiations in focus but we also have the Fed’s minutes and I expect them to be hawkish,” Peter Cardillo, chief market economist at Spartan Capital Securities in New York, told the Reuters.  “A combination of the Fed and the trade worries will make today a rocky session.”

Data from Eurozone is not encouraging either. A latest business survey shows the Euro zone economic growth slowed much more sharply than expected this month. Germany, the bloc’s largest economy, saw its economy expanded at the lowest rate in 20 months. Unemployment in France, as shown in a separate report, also rose in the first three months of 2018.

As well as moderating economic growth, inflation remains weak in the region. Inflation in UK fell unexpectedly in April, falling short of analysts’ expectation. Slower growth and easing inflation pose challenges to policymakers who plan to taper monetary easing without negative impact on economic growth.

The European Central Bank is expected to end its asset purchase program this year and hike interest rates in 2019. American policymakers are divided between how many more rate hikes for this year in addition to the raise in March, which makes Federal Reserve’s May meeting minutes, scheduled for release at 2:00 p.m. ET, even more closely watched.