Tech Stocks and China Tensions Weigh on the Markets

Tech Stocks and China Tensions Weigh on the Markets

The Nasdaq has been dragged down by a fall in technology shares, while geo-political tensions between the US and China have given investors room to pause, as reports China seized an unmanned US vessel sent oil higher, bonds yields and the dollar lower, and rattled equities.    

Image by Getty

On a day when the only semblance of drama was whether the Dow Jones Industrial Average would get to 20,000, traders were jarred from their seats as geopolitical tensions surfaced anew. The headlines spurred a rare bout of volatility in markets that have gone close to straight up since Donald Trump’s election, complicating the S&P 500 Index’s quest for its ninth gain in 11 days. The tensions have sent oil higher, bonds yields and the dollar lower, and rattled equities.

Tensions between the US and China have risen in recent weeks after President-elect Donald Trump broke a decades-old policy of not formally recognizing Taiwan’s government and suggested the long-standing OneChina policy can be used a bargaining chip in trade talks. China views Taiwan as a renegade province and further recognition by the US would likely elicit an immediate and forceful response and endanger a two-way trade relationship that reached $627 billion in 2015.

Near 1:00PM ET the Dow Jones Industrial average was up 12.23 points, or 0.06%, at 19,864.47. The S&P 500 was down 1.19 points, or 0.05%, at 2,260.84. The Nasdaq Composite was down 5.88 points, or 0.11%, at 5,450.98.

There are, however, also some growing concerns that the "Trump rally" may have gone too far too soon, and that valuations are stretched. The S&P 500 is trading at 17.9 times forward 12-month earnings, above the 10-year median of 14.7 times, according to StarMine data.

The yield on 10-year Treasuries fell as much as five basis points and gold futures spiked as investors sought safety assets. Crude jumped more than 1 percent, briefly topping $52 a barrel in New York, as a rise in maritime tensions could crimp deliveries. US equities erased 0.4 percent from session highs, and the dollar retreated versus its major peers. Soybean futures erased losses on the news.

The Federal Reserve, which raised interest rates for the second time in nearly a decade on Wednesday, sees a faster pace of rate hikes in 2017, partly due to the potential economic benefits from President-elect Donald Trump's policies. This too may be affecting the long term view of investors.


This information has been prepared by Nadex, a trading name of North American Derivatives Exchange, Inc., prepared by independent third parties contracted by Nadex or reproduced form third party news agencies. In addition to the disclaimer below, the material on this page does not contain an offer of, or solicitation for, a transaction in any financial instrument. Nadex accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication.