UKX FTSE 100 Index

By Chris Matthews and Mark DeCambre, MarketWatch

Geopolitical uncertainty continues to weigh on stocks

U.S. stock benchmarks on Wednesday morning whipsawed between modest gains and losses, a day after worries about U.S.-China trade tensions resulted in the worst daily decline for the Dow in about four months.

How are the benchmark indexes faring?

The Dow Jones Industrial Average rose 54 points, or 0.2%, to 26,023, the S&P 500 rose 7 points, or 0.2%, to 2,891, while the Nasdaq Composite Index rose 22 points, or 0.3%, to 7,991.

Opinion:The S&P 500's return the next five years? Zero, says Mauboussin (http://www.marketwatch.com/story/the-sp-500s-return-the-next-five-years-zero-says-mauboussin-2019-05-08)

On Tuesday (http://www.marketwatch.com/story/us-stock-futures-lower-as-trade-tensions-stay-in-the-spotlight-2019-05-07), the Dow tumbled 473.39 points, or 1.8%, to 25,965.09, suffering its largest percentage decline since Jan 3, while the S&P 500 index dropped 48.42 points, or 1.7%, to 2,884.05. The Nasdaq Composite Index fell 159.53 points, or 2%, to 7,963.76.

The S&P 500 and Nasdaq saw their biggest daily declines since March 22, according to FactSet data.

Read:The stock market is on pace for its worst month since December rout (http://www.marketwatch.com/story/the-stock-market-is-on-pace-for-its-worst-month-since-december-routas-volatility-returns-with-a-vengeance-2019-05-07)

What's driving markets?

U.S. stocks are on track for their longest string of consecutive daily losses since a five-session skid ended March 8, as Sino-American tariff tensions have buffeted assets perceived as risky, catching many investors who had anticipated a tidy pact to the protracted talks coming to fruition soon.

On Wednesday, a notice in the Federal Register formally laid the groundwork to raise tariffs on $200 billion of Chinese imports to 25% from 10% early Friday, following through on remarks by U.S. Trade Representative Robert Lighthizer regarding such a move on Monday. The prospect of higher tariffs was first raised on Sunday by President Donald Trump, rattling investors who had anticipated better progress toward a near-term resolution between the two superpower.

Read:'China has chosen to retreat' -- the U.S. view as negotiations reach critical juncture (http://www.marketwatch.com/story/china-has-chosen-to-retreat-the-us-view-as-negotiations-reach-critical-juncture-2019-05-08)

Trump once again weighed in on the negotiations via Twitter Wednesday, saying that the Chinese are now "coming to the U.S. to make a deal," implying they had previously been slow-walking the negotiations in the hope that Trump would be voted out of office in 2020.

(https://twitter.com/realDonaldTrump/status/1126106540015071232)

(https://twitter.com/realDonaldTrump/status/1126106541004873730)

Read:With Trump threatening to tighten the trade screws, here's a look at what tariffs have done so far (http://www.marketwatch.com/story/with-trump-threatening-to-tighten-the-trade-screws-heres-a-look-at-what-tariffs-have-done-so-far-2019-05-06)

Indeed, Beijing has said top trade envoys, including Vice Premier Liu He, will head to Washington on Thursday to resume negotiations. U.S. officials had accused Beijing of reneging on its side of the bargain and threatened to raise tariffs on $200 billion of Chinese imports to 25% from Friday.

Reuters on Wednesday reported (https://www.reuters.com/article/us-usa-trade-china-backtracking-exclusiv/exclusive-china-backtracked-on-nearly-all-aspects-of-us-trade-deal-sources-idUSKCN1SE0WJ) that China's diplomatic contingent attempted to revamp a nearly 150-page draft trade agreement last Friday, as they were reluctant to agree to signing new trade terms into law, and raising the ire of U.S. negotiators and perhaps prompting a Sunday tweet from President Donald Trump, threatening higher import duties

Adding to policy uncertainty, Iran said Wednesday it may cease compliance (http://www.marketwatch.com/story/iran-says-it-wont-comply-with-backs-out-of-some-2019-05-08) with portions of a 2015 nuclear deal it signed with the U.S., Britain, France, Germany, China and Russia. Iranian President Hassan Rouhani said that it would begin stockpiling heavy water and low-enriched uranium unless non-U.S. signatories take steps to shield the Iranian economy from Trump-Administration sanctions that have been crippling its economy.

Also potentially weighing on markets are mixed signs on the global economy, with new trade data out of China showing imports rising, but exports unexpectedly falling 2.7% (http://www.marketwatch.com/story/surprise-drop-in-chinas-exports-in-april-2019-05-07), suggesting that global economic weakness continues to be a threat with which U.S. investors must contend.

What are strategists saying?

"Some consolidation was to be expected, given the phenomenal start of the year," for markets, Eric Wiegand, senior portfolio manager at U.S. Bank, told MarketWatch, adding that the recent U.S.-China trade drama provides an opportunity for taking profits.

He also warned investors the trade dispute is "a phenomenon where you can't get an edge, because you're just one tweet away from having your previous posture undermined."

"Traders are in no mood to take a stand right now as the uncertainties regarding China and Iran take center stage," wrote Bespoke Investment Group's Paul Hickey in a note.

"The flight to safety has provided a big boost for Treasurys, re-flattening the yield curve closer to the inversion zone," he added. "And to think, just three trading days ago, the S&P 500 was flirting with a record high close!"

Which stocks are in focus?

Lyft Inc. shares were in focus after the ride-hailing company late Tuesday reported quarterly earnings for the first time since its initial public offering in March. The company reported first-quarter losses that were wider than expected, but revenue that topped expectations. The stock fell 4.9% Wednesday morning.

Opinion: Lyft stops providing key data after IPO, then insults investors' intelligence (http://www.marketwatch.com/story/lyft-stops-providing-key-data-after-ipo-then-insults-investors-intelligence-2019-05-07)

Shares of Coty Inc. (COTY) tumbled 5.2% after the company reported a narrower loss for the fiscal third quarter, ended March 31, than the previous three months, but revenue that fell 10.4%, below consensus expectations.

McKesson Corp. (MCK) stock rose 3.4% after the supply-chain management company reported first-quarter earnings above expectations.

Shares of Wendy's Co. (WEN) rose 1.6% after the fast-food chain reported first-quarter profits and sales that surpassed Wall Street forecasts.

Nautilus Inc. (NLS) stock fell 6.4% early Wednesday after the exercise equipment maker reported a first-quarter loss of 29 cents per share, versus analysts expectations of just 3 cents per share, according to FactSet.

TripAdvisor Inc. (TRIP) reported earnings Tuesday evening, with the company posting first-quarter earnings that beat analyst expectations, but falling revenue that widely missed forecasts. The stock fell 15.2%.

Radio-frequency component maker Qorvo Inc. (QRVO) also reported results Tuesday evening, announcing first-quarter sales and profits that beat Wall Street expectations. Shares rose 4.3% Wednesday.

Shares of Electronic Arts. Inc. (EA) rose 2.6% after the videogame maker reported better-than-expected net bookings and strong fiscal 2020 forecast, late Tuesday.

Shares of Chesapeake Energy Corp. (CHK) rose 1.4% Wednesday, reversing premarket losses, after the oil and natural gas company reported a wider first-quarter loss (http://www.marketwatch.com/story/chesapeake-energys-stock-bounces-into-the-green-as-investors-digest-q1-results-2019-05-08) and revenue that fell short of expectations. On the positive side, the company beat forecasts for earnings before interest, taxes, depreciation and amortization (Ebitda), as production and prices were above projections.

What's on the economic calendar?

In a light day for economic data, Lael Brainard, member of the Federal Reserve Board of Governors, delivered a speech on the central bank's ongoing review of its monetary policy framework, which the Fed hopes will enable it to better deliver on its mandate to foster maximum employment that is consistent with price stability.

How are other markets trading?

In Asia (http://www.marketwatch.com/story/asian-markets-mixed-as-traders-weigh-us-china-trade-dispute-2019-05-06), the Shanghai Composite Index fell 1.1%, while the Nikkei 225 , in its second day from an extended holiday break, declined by a sharper 1.5%, following a similar drop on Tuesday. European stocks were mostly lower (http://www.marketwatch.com/story/europe-markets-higher-as-investors-shake-off-trade-fears-2019-05-08), with the FTSE 100 index down 0.1%.

Gold was trading higher (http://www.marketwatch.com/story/gold-at-one-week-high-as-stock-losses-look-to-persist-2019-05-08), while the U.S. Dollar Index declined (http://www.marketwatch.com/story/new-zealand-dollar-falls-after-central-bank-cuts-rate-us-dollar-slips-2019-05-08) and crude oil edged lower (http://www.marketwatch.com/story/us-crude-oil-climbs-up-from-roughly-one-month-low-as-iran-trade-deal-tensions-tug-at-market-2019-05-08).

(END) Dow Jones Newswires

May 08, 2019 11:13 ET (15:13 GMT)

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