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Lingering Trade Worries Contributing To Weakness On Wall Street

wallstreet oct19 22may19 lt

Stocks have fluctuated over the course of morning trading on Wednesday but largely maintained a negative bias on the day. The major averages are giving back ground after moving notably higher in the previous session.

Currently, the major averages are off their worst levels but stuck in the red. The Dow is down 81.63 points or 0.3 percent at 25,795.70, the Nasdaq is down 25.38 points or 0.3 percent at 7,760.35 and the S&P 500 is down 7.23 points or 0.3 percent at 2,857.13.

The moderate weakness on Wall Street comes as traders continue to worry the trade dispute between the U.S. and China is escalating into a full-fledged trade war.

A report from the South China Morning Post said Chinas is re-examining the entire bilateral economic relationship between the U.S. and China.

The SCMP said Chinese government advisers are highlighting the risk of sourcing critical supplies from an increasingly hostile U.S. following the Trump administration's recent move to blacklist Chinese tech giant Huawei.

Mei Xinyu, a fellow at the research institute under China's Ministry of Commerce, told the SCMP that Beijing should prepare for the worst-case scenario to defend its rights in climbing up the global value chain through technological catch-up.

"Even if a deal is reached, it could be torn apart [by President Donald Trump] easily at any time," Mei said, comparing the current trade talk deadlock to the Panmunjom peace talks during the Korean War.

Adding to the trade concerns, Treasury Secretary Steven Mnuchin told CNBC's Ylan Mui the U.S. has no plans to go to Beijing to resume trade negotiations.

Trading activity has remained somewhat subdued, however, with traders looking ahead to the release of the minutes of the latest Federal Reserve meeting later in the day.

The minutes may shed additional light on the outlook for interest rates but could also be viewed as old news considering the constantly shifting developments on the trade front.

Oil service stocks are seeing substantial weakness in morning trading, dragging the Philadelphia Oil Service Index down by 2.4 percent.

The sell-off by oil service stocks comes amid a decrease by the price of crude oil, with crude for July delivery tumbling $0.93 to $62.20 a barrel.

Significant weakness is also visible among semiconductor stocks, as reflected by the 2.2 percent nosedive by the Philadelphia Semiconductor Index.

Qualcomm (QCOM) is posting a steep loss after a federal judge ruled the communications chip maker violated antitrust law.

Natural gas, transportation, and computer hardware stocks have also come under pressure, while most of the other major sectors are showing more modest moves.

In overseas trading, stock markets across the Asia-Pacific region closed mixed for the fifth consecutive session on Wednesday. Japan's Nikkei 225 Index inched up by 0.1 percent, while China's Shanghai Composite Index fell by 0.5 percent.

The major European markets have also turned mixed on the day. While the French CAC 40 Index is down by 0.1 percent, the German DAX Index is just above the unchanged line and the U.K.'s FTSE 100 Index is up by 0.3 percent.

In the bond market, treasuries are rebounding after edging lower over the two previous sessions. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 3.2 basis points at 2.394 percent.

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