The calm before the Fed storm? Dow edge higher at the start of eventful week
"That's the worst print since October 2016," said Peter Boockvar, chief investment officer at Bleakley Advisory Group. "It's hard to think this is all about tariffs and what it is doing to business confidence." Even the threat of tariffs was enough to put fear into businesses, it added. Capital spending in the Empire State survey slumped accordingly, showing that companies are skeptical about making investments.
The Fed
This week's Fed meeting on Wednesday is front and center in investors' minds. No changes to interest rates are expected, but investors will be watching Chairman Jerome Powell's press conference for future action.
By signing rate cuts are coming, Powell could add more fuel to this fire, which would probably send stocks higher . But if it says nothing about rate cuts, or if the Fed signals will keep rates steady, stocks could sell off. Either way, stocks could be volatile Wednesday, so maybe we should be thankful for a quiet start to the week.
The global trade war
"There is a huge element of uncertainty about how and when the Fed will cut interest rates because of the meeting between Trump and Xi at the G20 meeting next week, "said Craig Erlam, senior market analyst at Oanda, in a note.
President Donald Trump and Chinese Premier Xi Jinping are poised to meet at the sidelines of the G20 summit in Japan next week. Trump has said China would immediately face further tariffs if Xi didn't show up for the summit.
"The trade was the world's two largest economies has created enormous uncertainty for both economies and weighed on the outlook, forcing the Fed to pause the tightening cycle and consider easing conditions instead, "Erlam wrote.
So far to the US-China trade spat appears to be on the horizon.
Although the United States managed to reach an agreement with Mexico that imported import duties on Mexican goods, India imposed long-awaited tariffs on US imports in response to the steel and aluminum levies that were slapped on last year.
"These retaliatory measures show the vulnerability of the high pressure strategy characterized by the current US trade policy, "said Timme Spakman, economist at ING.
Negotiations weren't as easy as they were with Mexico every time, Spakman continued, and that heightens the risk of escalating tit-tariff tariffs fights.
