Investors are pushing the panic button on U.S.-China trade talks, analyst suggests

White House economic adviser Larry Kudlow, in a tweet that put an awkward exclamation point on Friday’s big stock-market rally, cheered “we’re killing it on the economy” and it’s “totally awesome.”

We’re killing it on the economy! 🔥

— The White House (@WhiteHouse) May 3, 2019

Nice timing, Lar.

In the first trading session since that tweet went viral, it certainly doesn’t feel totally awesome for traders who were anticipating good news on the trade front. Instead, the president announced Sunday that tariffs on $200 billion in Chinese goods will be increased on Friday to 25% from 10%.

“The Trade Deal with China continues, but too slowly, as they attempt to renegotiate. No!” Trump wrote in the surprise announcement.

Next thing you know, traders couldn’t dump stocks fast enough, and Trump returned to rage-tweeting about collusion and “Angry Democrats.”

But back to what this means for investors.

In our call of the day, Michael O’Rourke, chief market strategist at Jones Trading, suggests the selling might be overdone, considering the market over the past five years has generally taken the most optimistic view of any potential obstacles.

“The challenge for investors,” O’Rourke explained in an note, “is deciphering whether this another bluff by the president, an attempt to lower expectations in order to provide an upside surprise or actually a potential breakdown of the trade negotiations and an escalation of the trade war.”

At this point, it looks like skittish investors are approaching his tweet like the latter rather than, as TS Lombard’s Eleanor Olcott described it to Barron’s, Trump merely exercising his “Art of the Deal” tactics to deliver some surprise to the upside.

The market

The Dow DJIA, -1.21%  , S&P 500 SPX, -1.18%  and Nasdaq COMP, -1.40%  are down sharply as trading gets underway.

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