China's Response to Threats From President Trump Calms the Stock Market

Trade-sensitive stocks rally as the trade war with China continues to drive prices this week.

August 30, 2019 4 min read

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The major stock indexes were down more than two percent last Friday after President Trump threatened to increase tariffs again on Chinese goods, but rallied yesterday after China responded with surprising moderation. The U.S.’s largest trading partner said it would forego further tariff increases on American goods and hoped to settle the dispute with a “calm attitude.”

The two countries may still be a long way from a trade deal, but China’s response momentarily lifted investor sentiment. The Entrepreneur Index™ was up 0.52 percent in the last week while the Dow and S&P 500 indexes added 0.87 percent and 0.53 percent respectively. The tech-heavy Nasdaq Composite index had a decline of 0.23 percent in the last week.

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Trade-sensitive stocks got the biggest lift from China’s uncharacteristically measured response. Semiconductor chip-maker NVIDIA Corp. jumped 3.59 percent, though it was still down 0.69 percent in the last week. Fedex jumped 2.79 percent yesterday. For the year, it is down 3.52 percent however. Vehicle manufacturers also fared well. Ford Motor Co. was up 2.41 percent on the week while truck manufacturer PACCAR Inc. gained 2.64 percent. Tesla jumped nearly three percent yesterday after China said it would exempt sixteen Tesla vehicle models from import taxes. The stock is up another three percent in pre-market trading this morning.

Retailers continue to be among the most volatile sectors of the market with the trade war and the ongoing ecommerce transformation wreaking havoc on stock prices. Most got a bump yesterday on the China news. Costco Wholesale Corp. was up 6.46 percent in the last week —

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