U.S. stocks drop on trade, regulatory concerns

U.S. stocks fell after comments from president Donald Trump dented hopes on trade and rekindled regulatory concerns for the biggest social media companies.

The S&P 500 slid for a third day, with chipmakers leading the loss after Trump accused China of manipulating its currency and stealing intellectual property in remarks just weeks before planned high-level trade talks. Trump also warned social media platforms are acquiring “immense power,” potentially raising the specter of regulatory scrutiny for the likes of Facebook and Alphabet. Data showing a drop in consumer confidence also weighed on equities.

Treasuries rallied as investors remain on edge about global growth prospects and political turmoil in the U.K. and the U.S. House Democrats’ calls for impeachment of Trump amplified Tuesday over his conversations with Ukraine’s president, while the U.K.’s top judges inflicted an unprecedented legal defeat on Prime Minister Boris Johnson, adding to Brexit chaos. The 10-year Treasury yield fell back to 1.65% and the dollar was lower versus major peers.

“Markets have been a little bit optimistic hoping the trade talks that were being planned for next month would be a step forward,” Chris Zaccarelli, chief investment officer for Independent Advisor Alliance, said by phone. “It’s interesting to hear him lead off his speech in a way that’s antagonistic towards the Chinese. The market saw it not as an olive branch but more of an assertive tone.”

Economic surprise index climbed above zero for first time this year last week
Trump’s speech ratcheted up tensions between the U.S. and China, keeping markets on edge ahead of planned high-level talks between the world’s two biggest economies in October. His renewed pressure on some of the biggest American companies sent a jolt through technology indexes.

Meanwhile, underwhelming economic indicators are muddying the picture, with the U.S. consumer showing signs of losing momentum adding to worries. Downbeat numbers from Japan and mixed data from Germany were stark reminders of the fragility of global growth. And political risks loom large for investors, from Brexit to a U.S. Congressional investigation into Trump’s dealings with Ukraine.

“All eyes are on early October, although there’s not a lot of expectation that anything material is going to come out from it,” John Lau, head of Asian equities at SEI Investments Co., said of the trade talks in an interview with Bloomberg Television. “If we get some kind of deal, any kind of deal, that would actually move markets.”

European stocks edged ended flat, though gauges in the U.K. and Germany fell. Shares gained in Tokyo, Hong Kong and Shanghai, and were little changed in Sydney. The pound climbed after the U.K. Supreme Court said Prime Minister Boris Johnson’s suspension of Parliament was unlawful. Oil fell on signs Saudi Arabia is making progress in restoring lost output following a drone attack on its facilities.