Dow Erases Big Gains as Clock Ticks on Government Shutdown, US-China Trade Negotiations

The U.S. stock market traded mixed-to-lower on Monday, as the Dow and other major indexes gave back gains amid high-stakes trade negotiations between the United States and China.

DOW SWINGS LOWER

The Dow Jones Industrial Average opened 136 points higher on Monday and was up by as much as 190 points through the early morning. The gains, which reflected a strong pre-market session for Dow futures, quickly evaporated as investors braced for a big week. At the time of writing, the blue-chip index was down 18 points, or 0.1%, at 25,087.54.

Shares of Pfizer Inc. (PFE), Walt Disney Co (DIS) and Merck & Co (MRK) were the biggest laggards.

The broad S&P 500 Index gave up gains and was trading flat at 2,707.45. Industrials stocks were the only notable gainers. On the opposite side of the ledger, communication services companies and health care stocks headed lower.

The Nasdaq Composite Index edged up 0.2% to 7,302.47. The tech bellwether was up by as much as 0.7% earlier.

Despite the strong start for U.S. stocks, the CBOE VIX implied volatility index headed higher after the open. At last check, the so-called “fear index” had gained 4.3% to 16.40.

Volatility has been in a rapid retreat since the beginning of the year as Wall Street staged its most impressive January rally in over three decades. VIX peaked above 36.00 on Christmas Eve, a reading that was well above the historic norm.

BIG WEEK FOR US STOCK MARKET

Donald Trump will make the case for increased border protection at a rally in El Paso, Texas on Monday. | Source: Shutterstock.

The trading week kicked off with a new round of U.S.-China trade negotiations in Beijing. Negotiators have until Mar. 1 to reach a new deal or risk the resumption of a bitter tariff war between the two superpowers. President Donald Trump confirmed last week he will not be meeting with China’s Xi Jinping before the deadline. It remains to be seen whether this will impact the chances of a new deal.

The looming trade-war threat has propelled the U.S. dollar higher. Read the latest on gold and the greenback on Hacked.com.

Meanwhile, Congress has until Friday to agree on a new budget or risk a further disruption to government services. Lawmakers were expected to finalize their work on a budget last week to allow enough time for votes. Efforts to avoid another partial government shutdown broke down on Friday over border security. President Trump has apparently backed off his demand for a full $5.7 billion steel barrier along the U.S.-Mexico border but has called for physical barriers at key locations.

On the economic calendar, the Department of Labor will release the latest batch of consumer inflation data on Wednesday. Reports on retail sales, producer prices, and jobless claims are due Thursday. The week draws to a close with the latest report on industrial production and the University of Michigan consumer sentiment index.

Featured image courtesy of Shutterstock. Chart via Tradingview.