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U.S. Stocks May Extend Pullback Amid Rising U.S.-China Tensions

wallstreet july23 04may20 lt

Following the sharp pullback seen over the two previous sessions, stocks are likely to see further downside in early trading on Monday. The major index futures are currently pointing to a lower open for the markets, with the Dow futures down by 197 points.

Concerns about rising tensions between the U.S. and China may weigh on Wall Street after U.S. Secretary of State Mike Pompeo claimed on Sunday there was "a significant amount of evidence" that the new coronavirus originated from a laboratory in China.

China's Global Times said in an editorial that Pompeo was "bluffing" and called on the United States to present its evidence.

The comments from Pompeo come after top White House economic advisor Larry Kudlow told CNBC that China would be "held accountable" for the coronavirus.

President Donald Trump has previously indicated he is considering imposing tariffs on China over its handling of the outbreak.

Airline stocks may help lead the markets lower after Berkshire Hathaway Chairman and billionaire investor Warren Buffett said the conglomerate has sold its entire equity position in the U.S. airline industry.

"The world has changed for the airlines," Buffett said during Berkshire's annual shareholder meeting Saturday, citing the potential long-term impact of the coronavirus pandemic.

According to CNBC, Berkshire's airline holdings were worth more than $4 billion dollars as of December and included positions in United (UAL), American (AAL), Southwest (LUV) and Delta Airlines (DAL).

Shortly after the start of trading, the Commerce Department is scheduled to release its report on new orders for manufactured goods in the month of March. Factory orders are expected nosedive by 9.8 percent.

Stocks moved sharply lower over the course of the trading day on Friday, extending the pullback seen last Thursday. With the steep drop on the day, the major averages continued to give back ground after ending last Wednesday's trading at their best closing levels in well over a month.

The major averages ended the day firmly in the red. The Dow tumbled 622.03 points or 2.6 percent to 23,723.69, the Nasdaq plunged 284.60 points or 3.2 percent to 8,604.95 and the S&P 500 slumped 81.72 points or 2.8 percent to 2,830.71.

For the week, the Dow and the S&P 500 both edged down by 0.2 percent, while the Nasdaq slipped by 0.3 percent.

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance on Monday, with markets in Japan and mainland China closed for holidays. Hong Kong's Hang Seng Index plunged by 4.2 percent, while Australia's S&P/ASX 200 Index jumped by 1.4 percent.

Meanwhile, European stocks have moved sharply lower on the day. The French CAC 40 Index and the German DAX Index have plunged by 3.6 percent and 3.3 percent, although the U.K.'s FTSE 100 Index has bucked the downtrend and inched up by 0.1 percent.

In commodities trading, crude oil futures are slipping $0.19 to $19.59 a barrel after jumping $0.94 to $19.78 a barrel last Friday. Meanwhile, after climbing $6.70 to $1,700.90 an ounce in the previous session, gold futures are rising $6.40 to $1,707.30 an ounce.

On the currency front, the U.S. dollar is trading at 106.87 yen versus the 106.91 yen it fetched at the close of New York trading on Friday. Against the euro, the dollar is valued at $1.0933 compared to Friday's $1.0981.

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