Will the Stock Market Maintain Its Rebound?

As investors await the outcome of today’s U.S.-China trade talks, the stock market is moving at a deliberate pace.

Major benchmark indexes opened in the green but have since dropped into the red, with the Dow Jones Industrial Average recording narrow losses of less than 1 percent ahead of the two-day vice ministerial-level meeting in Beijing. The Nasdaq Composite also saw mild improvement below 1 percent, while the S&P 500 climbed a more modest 1.5 percent.

Deputy U.S. Trade Representative Jeffrey Gerrish is expected to lead the delegation that will convene with Chinese officials. It marks the first face-to-face assembly between the United States and China since President Donald Trump and his Chinese counterpart, Xi Jinping, agreed to a 90-day financial ceasefire at last month’s G20 summit in Buenos Aires, Argentina.

In less than two months, the truce in the trade war between the world’s two largest economies reaches its deadline. Washington has already imposed tariffs on $250 billion worth of Chinese imports, while Beijing retaliated with levies on $110 billion in U.S. goods. (The White House put on hold its threat to raise tariffs from 10 percent to 25 percent on $200 billion of those products.)

The upcoming meeting has stoked investors’ hopes that negotiations between Washington and Beijing would result in a permanent deal. According to a Reuters report published today, China’s foreign ministry has expressed “good faith” in working with the U.S. to end their trade dispute. The tit-for-tat has already contributed to volatility in the stock market, which in 2018 recorded its worst year of trading since the 2008 financial crisis.

Despite a turbulent start to 2019, U.S. stocks rallied late last week after a better-than-expected jobs report, a rebound in tech shares and news of the fresh round of trade talks. On Friday, the Dow surged nearly 750 points, or more than 3 percent, while the S&P also popped up 3 percent.

This year’s market returns could also be swayed by the Federal Reserve’s decision to raise interest rates, as well as signs of a global slowdown stemming from a weak manufacturing report from China and British Prime Minister Theresa May’s Brexit deal, which is scheduled for a parliamentary vote in mid-January.

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