The ongoing tensions between the US and China are causing a market pullback. The Dow closed the day off 313 at 26,164. Trading volume was higher by 10% indicating the big boys are taking money off the table. Both IBD and BTS have markets as “under pressure” but as of yet we have not seen a shift to “correction" mode. All eyes are on the upcoming trade talks between China and the US.
Trade tensions rose as non-trade related issues appear to be spilling over into trade related talks set for this Thursday. The Trump administration blacklisted 28 Chinese companies over human rights abuses of Muslim Uighurs in China. These companies will need to get approval from the US gubment before they can do business with America. China said the move is a mistake and asked the White House to reconsider. In a separate issue China is upset with the NBA after someone who works for the Houston Rockets said he supports protesters in Hong Kong. The NBA has $1.5 billion in broadcast revenue on the line. Adding to the mix is the latest episode of South Park which was filled with parody about censorship in China and caused the CCP to ban the show. Whether these side issues will play a role in trade talks set for this Thursday is anyone’s guess but for now they appear to be injecting volatility into US equity markets.
Signs of cooling economic growth were seen in the latest National Federation of Independent Business’s (NFIB) optimism index which declined 1.3 points to 101.8 in September. While the index is still at historic levels this latest reading came in below expectations calling for a reading of 102 it marks the third drop in four months. While service and manufacturing activity cools, labor remains tight and consumer activity is robust.