Stocks fell to their lows of the day after the Financial Times reported the U.S. canceled a trade meeting with Chinese officials. CNBC later confirmed the report through a source. White House economic advisor Larry Kudlow denied the reports, saying the meetings are not canceled, giving stocks a boost into the close. China and the U.S. are trying to strike a permanent trade deal with the U.S. Both countries have been in a trade war since last year, slapping tariffs on billions of dollars worth of their goods.
“In the end, it will all depend on how Trump decides between a short-term outcome and longer-term aims,” Jonathan Fenby, chairman of the China team at TS Lombard, said in a note Sunday. “If Trump wants a deal for his own purposes, he can side with those in the administration who think a broader agreement can be constructed to enable the two countries to revert to a less confrontational relationship which will spare US companies from further trade war damage and cheer markets while setting Beijing on a more resolute path of reform.”
The IMF, meanwhile, said Monday the global economic expansion is losing momentum. This led the institution to trim its 2019 growth forecast to 3.5 percent from 3.7 percent. The IMF also cut its 2020 growth outlook to 3.6 percent from 3.7 percent.
The major indexes added to their losses after the National Association of Realtors said U.S. existing housing sales fell to their lowest level in three years. The iShares U.S. Home Construction ETF (ITB) pulled back 1.7 percent.
“Volatility is going to persist,” said Komal Sri-Kumar, president of Sri-Kumar Global Strategies. “Not much has changed in the world, in my opinion, since December.”
“The global situation is uncertain on several areas,” Kumar said. “On top of that, you have policy uncertainty coming from Washington. We don’t know what the U.S. government policy is going to be on various issues. That uncertainty is going to cause more fluctuations in the market.”
Stocks came into Tuesday’s session riding a four-week winning streak, their longest since August, as investors have largely shrugged off fears of a slowdown in earnings growth as well as an ongoing U.S. government shutdown. The S&P 500 is also up more than 10 percent since Dec. 24.
“As impressive as the recovery has been, there is still growing concern over the current V-shaped recovery due to correction lows historically being retested, as was the case in ’11 and ’16,” said Craig Johnson, chief market technician at Piper Jaffray, in a note. “While recent history and an overcrowded consensus suggest the market may revisit the December lows, we believe there is sufficient evidence that also suggests a double-bottom is not mandatory for the current recovery process.”
Arconic fell 16 percent after announcing it would abandon the pursuit of a company sale.
Shares of eBay jumped 6.1 percent after hedge fund Elliott Management revealed a $1.4 billion stake in the company. Elliott also sent extensive recommendations to the company’s management team.