Stocks fell worldwide on Wednesday amid fears of an escalation of the trade war between the United States and China although robust results from Apple Inc. helped cap losses.
Apple, which jumped 5.9 per cent to a record high of US$201.50 after predicting a surge in current-quarter sales, was one of the biggest advancers on all three major U.S. stock indexes.
Still, market participants said Wednesday’s reversal after a recent selloff of tech shares might not be sustainable.
“Whether that is a long-lasting effect on the tech sector is a question that cannot be answered,” said Randy Frederick, vice president of trading and derivatives for Charles Schwab in Austin. “There is a big additional tariff that is being weighed and could be put into place at any moment, which is a concern.”
The U.S. administration plans to propose tariffs of 25 per cent instead of 10 per cent on $200-billion worth of imported Chinese goods. Beijing vowed to retaliate if the United States slapped further tariffs.
The Dow Jones Industrial Average fell 79.34 points, or 0.31 per cent, to 25,335.85, the S&P 500 lost 2.73 points, or 0.10 per cent, to 2,813.56 and the Nasdaq Composite added 35.50 points, or 0.46 per cent, to 7,707.29.
In Toronto, the S&P/TSX composite index closed down 0.35 per cent, or 57.24 points, at 16,376.66.
Materials stocks fell 1.4 per cent, while energy stocks dropped 0.4 per cent with the price of oil.
Declining stocks included Magna International Inc., which fell 3.3 per cent, and Imperial Oil Ltd., which loss 1.8 per cent.
MSCI’s gauge of stocks across the globe shed 0.12 percent, while the pan-European FTSEurofirst 300 index lost 0.48 per cent.
Equities investors were also parsing the Federal Reserve’s policy statement on Wednesday, which kept benchmark U.S. interest rates unchanged after a two-day meeting but characterized the economy as strong, keeping the central bank on track to increase borrowing costs in September.
While equities sold off ahead of the Fed’s statement, Wall Street barely reacted after it was released.
“It looks like a nothing burger,” said Phil Orlando, New York-based chief equity strategist at Federated Investors. “They left rates unchanged, which was expected. They talked about the fact that the economy is doing pretty well, which it is.”
The yield on the benchmark 10-year U.S. Treasury note was also little moved by the Fed statement, but it broke above 3 percent for the first time since June 13 after the U.S. government said it would boost borrowing in the coming quarter to fund spending and debt obligations.
The government needs to fund a rising budget deficit even as the Fed continues to reduce its massive bond portfolio.
The dollar index rose 0.14 per cent, with the euro down 0.21 per cent to $1.1667.
The Japanese yen strengthened 0.33 per cent versus the greenback at 111.52 per dollar after Tuesday’s pledge by the Bank of Japan to keep rates extremely low for an extended period.
Traders appeared to be putting the BOJ’s tolerance for higher yields to the test on Wednesday as the benchmark 10-year Japanese government bond yield rose to 0.12 per cent in its biggest one-day rise in two years.
Oil prices fell on data showing an unexpected rise in U.S. crude stockpiles. The price slump follows their largest monthly decline in two years in July.
U.S. crude fell 1.60 per cent to settle at $67.66 per barrel and Brent was last at $72.43, down 2.4 per cent.
The Canadian dollar strengthened to a nearly seven-week high against its U.S. counterpart on Wednesday as the U.S. Federal Reserve left interest rates on hold and officials signaled progress in talks to update the NAFTA trade pact.
The United States and Mexico are getting close to a deal on the key issue of autos content rules at negotiations to renew the North American Free Trade Agreement, Mexican and Canadian officials said.
There is a belief in the market that progress on autos between the United States and Mexico will bring a NAFTA deal one step closer, said Mark Chandler, head of Canadian fixed income and currency strategy at RBC Capital Markets.
“Over the last few days that’s what has helped the Canadian dollar a little bit at the margin.”
The Fed kept interest rates unchanged but characterized the economy as strong, keeping the central bank on track to increase borrowing costs in September.
The Canadian dollar was trading 0.1 per cent higher at $1.2996 to the greenback, or 76.95 U.S. cents. The currency touched its strongest since June 14 at $1.2975.
The modest gain for the loonie came as data showed that the pace of growth in Canada’s manufacturing sector eased in July but remained at a robust level. The IHS Markit Canada Manufacturing Purchasing Managers’ index (PMI) dipped to a seasonally adjusted 56.9 last month from a survey-record high of 57.1 in June.
“The general level of activity is very good,” Chandler said. “It (the PMI) has a very good correlation with GDP.”
Economists have said that second-quarter economic growth was likely to come in at 3.0 percent on an annualized basis, just above the Bank of Canada’s 2.8-per-cent forecast.
Reuters