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Wall Street closes mixed as renewed trade concerns offset rebound in tech

  • Falling crude oil prices continue to weigh on the energy sector.
  • Technology rebounds to help Nasdaq stay in the positive territory.
  • Trade concerns drag industrials lower.

After starting the day on a positive note, major equity indexes in the U.S. lost their traction after reports of Trump administration planning to announce 25% tariffs on $200 billion worth of Chinese goods instead of the originally planned 10%. The trade-sensitive S&P 500 Industrials fell more than 1% on the day after these headlines. However, a sharp rebound witnessed in technology shares allowed the tech-heavy Nasdaq Composite to recover and close the day in the positive territory.

On the back of Apple shares, which advanced to an all-time high after the company reported upbeat earnings figures on Tuesday after the closing bell, the S&P 500 Information Technology Index added nearly 1% to become the performing sector of the day.

"We have an administration that does not understand trade economics. They just don't get it. This clearly is not in the interest of the United States. It is going to really harm trade, it will raise inflation, which is going to force the Federal Reserve to lift interest rates even more,"  Bernard Baumohl, the chief global economist at the Economic Outlook Group in Princeton, New Jersey, told Reuters on Wednesday.

Meanwhile, the FOMC announced that it maintained its policy rate in the 1.75%-2% range and reiterated that further gradual rate hikes would be in line with the pace of economic expansion, strong labor market, and the inflation objective. The Fed's hawkish stance helped the S&P 500 Financials Index retrace its losses to close the day flat.

On the other hand, the EIA reported a surprise increase of 3.8 million barrels in the U.S. crude stocks and weighed on crude oil prices. The barrel of WTI lost more than 1% and broke below the $68 mark for the first time in a week. The S&P 500 Energy Index lost 1.33%.

DJIA Technical Outlook (via FXStreet Chief Analyst Valeria Bednarik)

"The Dow trimmed Tuesday's modest gains and established a lower low for the week, but in the daily chart, it is still holding above all of its moving averages, with the 20 DMA barely losing upward strength some 200 points below the current level,  and more relevant, holding above the 23.6% retracement of its July bullish run. Technical indicators in the mentioned chart have continued easing, but the Momentum is now flat, right above its mid-line while the RSI retreats at around 60, all of which suggests that the current decline could be just a correction."

"Shorter term, and according to the 4 hours chart, the bearish potential is clearer, as the index settled below a bearish 20 SMA, while technical indicators entered negative territory, with the RSI currently heading south at around 45, in line with further slides ahead."

According to the analyst, supports for the pair align at 25,277, 25,222, and 25,168 while resistances are located at 25,384, 25,446, and 25,493.

Author

Eren Sengezer

As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.

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