Stock market news: August 19, 2019

U.S. stocks rallied Monday in an at least temporary reprieve after a mid-August rout. U.S. government bond yields rose across the curve, led by yields on 30-year bonds and 10-year notes.

Here were the main moves in the market, as of market close:

  • S&P 500 (^GSPC): +1.21%, or 34.94 points

  • Dow (^DJI): +0.96%, or 249.72 points

  • Nasdaq (^IXIC): +1.35%, or 106.82 points

  • 10-year Treasury yield (^TNX): +6.5 bps to 1.605%

Commerce Secretary Wilbur Ross said during an appearance with Fox Business Monday morning that the government would extend a 90-day temporary license allowing China’s Huawei Technologies to continue doing business with U.S. firms. This license would have lapsed Monday, however, Ross told Fox Business, “We’re giving them a little more time to wean themselves off.” Huawei counts U.S. companies including Qualcomm (QCOM), Intel (INTC) and Micron Technologies (MU) as suppliers.

Ross also said that 46 new Huawei subsidiaries were being added to the entity list, meaning U.S. firms cannot sell to these in absence of a specific license. The new additions bring the total list of Huawei subsidiaries on the Commerce Department’s blacklist to more than 100.

This came after President Donald Trump said over the weekend that the U.S. is “doing very well with China, and talking!” However, he added in remarks to reporters Sunday that he was not yet ready to sign a trade deal, underscoring the ongoing deadlock between the two largest economies in the world.

During the same remarks to reporters, Trump said that Apple (AAPL) CEO Tim Cook “made a very compelling argument” for why it would be difficult for the iPhone-maker to compete with South Korea’s Samsung in the face of escalating tariffs on Chinese imports. Much of Samsung’s manufacturing takes place in South Korea, allowing the company to dodge tariffs on goods from China that Apple would be saddled with if the Trump administration’s tariffs were broadened out.

Trump originally planned to have a 10% tariff take effect on $300 billion worth of Chinese imports September 1. Last week, however, he delayed some of these duties – including those on cellphones and laptops – until early December.

Traders work on the floor at the New York Stock Exchange (NYSE) in New York, U.S., August 14, 2019. REUTERS/Eduardo Munoz

The tariffs taking effect September 1 – which will now be on an additional $112 billion worth of Chinese imports – are expected to cost each American household as much as $1,000 per year, according to a JPMorgan analysis. That’s up from $600 per household previously. The cost to consumers would increase to as much as $1,500 per household if the tariff rate on the new slate of goods were increased to 25%, and would offset the estimated $1,300 benefit the average American household received from the Trump administration’s Tax Act, the JPMorgan analysts said.

Meanwhile, signals of increased stimulus from overseas governments in countries that have been most bruised by trade tensions and a global slowdown added to sentiment Monday.

Over the weekend, the People’s Bank of China (PBOC) unveiled an interest rate update for new bank-issued loans, which would lower real rates for companies. The new quotation system, which will stem from rates from open market operations and take effect Tuesday, will keep corporate financing costs down for companies, helping to encourage borrowing and investment as the country’s growth takes a hit amid the U.S.-China trade war.

Elsewhere, reports Monday suggested the German government was readying a fiscal stimulus package that could be unleashed in the event of continued economic contraction. Germany’s economy contracted 0.1% in the second quarter, as distress signals mounted for the export-driven country, and after the country’s manufacturing sector softened over the course of the year.

Fed watch

The path for future domestic monetary policy remains firmly in focus this week as investors consider risks from the trade war and a dovish bias among global central banks, which have sent interest rates plunging around the world.

On Wednesday, the Federal Reserve will release the minutes from its July policy meeting, wherein central bank officials delivered their first interest rate reduction since 2008. The minutes will detail the deliberations of the Federal Open Market Committee members in making this decision, and shed some light into the thinking of the two dissenters, who at the time called for rates to remain unchanged.

Then, at the end of the week, Federal Reserve Chair Jerome Powell will deliver a speech on monetary policy at the Fed’s annual Jackson Hole symposium in Wyoming. Markets participants widely believe the Fed leader will use the public remarks as an opportunity to reinforce expectations for another rate cut after the central bank’s September meeting, which would bring the target band down to between 1.75% and 2.00%.

Mark your calendars!

As of Monday morning, markets priced in a 92.7% probability of such an outcome, along with an about 7% probability of a further 50 basis point reduction to between 1.50% and 1.75%, according to CME Group.

But with expectations firmly anchored to the notion of lower rates, any deviation from dovish rhetoric could spell disaster for markets, some analysts said.

“The upshot is that there is a risk Powell and his colleagues end up disappointing the bond market next week – by not signaling clearly enough that additional rate cuts are coming in mid-September and beyond,” Paul Ashworth, chief U.S. economist for Capital Economics, wrote in a note. “That could trigger carnage in the bond and equity markets.”

“We may not even have to wait for the kick off of the Jackson Hole symposium,” he added. “The minutes of the July FOMC meeting, due for release on Wednesday, could also be a big market mover if they show officials were resistant to multiple rate cuts.”

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck

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