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S&P 500, Dow end in the red after report China would renege on trade pledges

Stocks lost early gains following a report that some U.S. officials are worrying China may renege on pledges it made with the U.S. around trade talks.

“Some U.S. officials are concerned that China is pushing back against American demands in trade talks as progress slows toward a deal that could give President Donald Trump a boost for his 2020 reelection bid, according to people familiar with the talks,” Bloomberg reported Tuesday afternoon ET. “Chinese negotiators have shifted their stance with the view that while they have agreed to changes to their intellectual-property policies, they haven’t received assurances from the Trump administration that tariffs imposed on their exports would be lifted.”

The S&P 500 (^GSPC) slipped 0.01%, or less than 1 point, as of market close, with the Utilities and Financials sectors leading declines. The Dow (^DJI) fell 0.1%, or 26.72 points, while the Nasdaq (^IXIC) rose 0.12%, or 9.47 points. The Dow was up 195 points at its high of the day and had ended the past four sessions higher.

U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin will travel to Beijing next week to continue discussions to work toward a deal, an administration official confirmed to Yahoo Finance Tuesday.

These developments come as the Federal Reserve kicks off the first of two days of policy meetings.

The Fed’s Open Market Committee (FOMC) will release a statement on policy Wednesday afternoon, followed by public comments from Fed Chairman Jerome Powell. Currently, markets are pricing in a 98.7% probability that no rate hike will occur after this meeting, according to CME Group’s closely monitored FedWatch tool. This would leave the benchmark interest rate unchanged at a band of 2.25% to 2.5%.

Consensus economists also expect that the Fed’s dot plot – a chart of rate projections for each of the FOMC members – will signal one rate hike in 2019, down from the two increases officials had telegraphed following the December meeting.

U.S. Treasury yields rose ahead of the FOMC meetings. The yield on the 2-year note, which moves inversely to the price, increased 1.7 basis points to 2.473%. The yield for the 10-year note rose 1.5 basis points to 2.616% as of 4:10 p.m. ET.

The Federal Open Market Committee kept rates unchanged after its January meeting. Photographer: Michael Nagle/Bloomberg via Getty Images

Overseas, the British pound rose against the U.S. dollar (GBPUSD=X) and stabilized at about $1.32 after falling Monday amid news that parliament speaker John Bercow was effectively blocking another vote on Prime Minister Theresa May’s Brexit deal. May is set to formally request an extension from the EU later this week, after MPs voted last week both to reject a no-deal Brexit and to delay the departure past the original March 29 deadline.

Elsewhere, crude oil prices extended gains to reach new 2019 highs after OPEC and affiliated producers earlier this week signaled a commitment to price-boosting supply cuts. West Texas intermediate crude oil prices (CL=F) touched as high as $59.57 per barrel Tuesday, while Brent crude oil prices (BZ=F) rose to as high as $68.20 per barrel.

STOCKS

Canadian pot company Tilray (TLRY) reported fourth-quarter revenue that topped consensus expectations, and sold more of its cannabis at higher prices. Revenue was $15.5 million, or triple the amount it earned over the past year. However, higher operating expenses drove the company to report a quarterly loss of $31 million, or 10 times the $3 million it lost last year. Average net selling price per gram of $7.52 beat the $7.13 it saw last year, and the company sold 2,053 kilograms of cannabis in the fourth quarter, from 1,613 kilograms in the quarter prior.

Boeing (BA) is under more scrutiny after Transport Canada said it was reassessing approvals it gave the company’s 737 Max jet. This comes following earlier reports that U.S. officials are probing the development of the jetliners, and the Federal Aviation Administration’s certification of the aircraft. The U.S. Department of Transportation confirmed Tuesday that secretary Elaine Chao has asked the inspector general to conduct a formal audit of the certification process for the Boeing 737 Max 8. Separately, Boeing CEO Dennis Muilenberg released a statement Monday reaffirming that the company is working to launch a software update and new pilot training for the 737 Max and “to earn and keep the trust people have placed in Boeing.”

Shares of Boeing were downgraded to Hold on Monday by John Eade of Argus Research. The firm last rated shares as Buy since 2012. “In the near term, the company is struggling, along with aviation investigators, to quickly determine the cause of two fatal crashes involving the company’s popular 737 Max jet. Boeing management has not been particularly proactive in its response, and we think the shares are subject to downward pressure as the investigation plays out in the news,” Eade wrote.

ECONOMY

New orders for durable goods, or manufactured products lasting more than three years, rose 0.3% in January, according to the Census Bureau’s final reading for January released Tuesday. This was lower than the 0.4% from the previous print, but above the 0.1% increase seen in December. Excluding transportation, durable goods orders dropped 0.2%, steeper than the 0.1% decline seen in the previous print.

Factory orders rose 0.1% in January, below the 0.3% expected and unchanged from the 0.1% increase from December.

The final reading for non-defense capital goods orders excluding aircraft, however, remained unchanged at a 0.8% increase in January. This metric is closely watched as a proxy for business investment.

Jessica Smith contributed to this report.

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

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