Dow falls 150 points as trade worries resurface

American and Chinese officials are returning to the negotiating table this week in Washington, D.C., but investors are pessimistic about their chances of reaching a deal.

Overshadowing the get-together is a blacklist of 28 Chinese organizations. The United States has effectively barred those companies from importing US technology because of their alleged roles in facilitating human right abuses in China’s Xinjiang region.

Investors are awaiting potential retaliation from Beijing.

Stocks recovered from their worst losses in early afternoon trading. The Dow (INDU) was down more than 150 points, or 0.6%. At its worst it was more than 300 points lower. The S&P 500 (SPX) also bounced back, and was last down 0.9%.
The tech-heavy Nasdaq Composite (COMP) traded 0.9% lower.

Stocks closed lower on Monday, following a rather uneventful trading day. It was the market’s first down day in three sessions.

The 10-year Treasury yield is lower at 1.5391%, as the demand for safe-haven bonds is on the rise thanks to the trade uncertainty. Yields and prices move opposite one another.

Trade is keeping investors on their toes. Some 24 hours after President Donald Trump signed a trade deal with Japan, and a week after the United States slapped import tariffs on the European Union over subsidies for Airbus, there is little indication how it will all play out.

This uncertainty is weighing on business sentiment.

The NFIB small business survey showed optimism fell for a second straight month in September, though it remains relatively high on the whole. The uncertainty index in the survey also rose.

In economic data, the producer price index for September slipped to 1.4% year-over-year, compared with 1.8% expected. Stripping out the volatile food and energy component, the core PPI fell to 2% year-over-year, versus 2.3% expected. That inflation rate is roughly in the target range for the Federal Reserve.

“The decline in core producer prices in September was driven mainly by the volatile trade, trasnport and warehousing services components, but the big picture is that domestically-generated inflationary pressures remain fairly subdued,” wrote Andrew Hunter, senior US economitst at Capital Economics.

All this comes ahead of the consumer price inflation read on Thursday, which is expected to come in at 1.8%, according to economists polled by Refinitiv.