U.S. stocks dropped Wednesday as investors continued to weigh the impact of escalating tension between the U.S. and China.
The U.S. is contemplating banning up to five Chinese tech firms from doing business with American companies, Bloomberg News reported Tuesday, citing unnamed sources familiar with the matter. The Trump administration has reportedly been concerned about these companies’ alleged role in ethnic repression in China’s west, as well as the potential for the companies to use their technology for espionage.
Carrying out the ban would likely be viewed as a further assault on China’s technology sector, after the Trump administration last week blacklisted China’s Huawei from doing business with U.S. firms, citing national security concerns. That move had sent shares of U.S. chipmakers including Qualcomm (QCOM), Intel (INTC) and Qorvo (QRVO) lower as investors considered the damage to the companies that count Huawei as a customer in their supply chains.
Elsewhere, investors have been digesting commentary from Federal Reserve officials speaking throughout the week, as well as the release of the central bank’s minutes from its latest meeting.
In the minutes, officials said that they felt their current patience stance to monetary policy could stay in place “for some time,” reaffirming Chairman Jerome Powell’s comments earlier this month telegraphing that the central bank felt no strong need to move rates in either direction.
The most recent meeting ending in early May took place before the ramp-up in equity market volatility spurred after the U.S. increased the tariff rate on $200 billion worth of Chinese goods. Markets have since priced in a higher likelihood of an interest rate cut by the end of the year, with CME Group’s closely monitored FedWatch tool reflecting an about 70% probability of at least one cut by the Fed’s December meeting as of Wednesday afternoon.
Earlier Wednesday, St. Louis Fed President James Bullard said the Fed may need to lower the benchmark interest rate in order to help get inflation levels closer to desired levels. Inflation has run persistently below the Fed’s 2% target, and was most recently shown to have tracked at 1.6% in March, according to the Fed’s preferred core personal consumption expenditures gauge. Lower interest rates would help encourage borrowing and then spending on consumer goods, pushing inflation higher.
“A downward policy rate adjustment even with relatively good real economic performance may help maintain the credibility of the FOMC’s inflation target going forward,” Bullard said in a presentation delivered in Hong Kong. “A policy rate move of this sort may become a more attractive option if inflation data continue to disappoint.”
Treasury yields were mostly lower Wednesday after the release of the Fed’s meeting minutes. The yield on the 10-year Treasury note, which moves inversely to the price, slipped 3.5 basis points to 2.391% Wednesday afternoon.
Lowe’s (LOW) slashed its earnings guidance for 2019 and missed Wall Street’s first-quarter bottom-line expectations amid higher cost pressures. The home improvement retailer delivered adjusted earnings of $1.22 per share, lower than the $1.33 per share expected, while net sales of $17.74 billion exceeded expectations.
CEO Marvin Ellison said cost pressures and “ineffective legacy pricing tools” weighed on margins and earnings in the three months ending in May, but that the company is working to mitigate these impacts in the coming quarters.
Nordstrom (JWN) missed consensus expectations in results delivered after-the-bell on Tuesday. The company slashed full-year earnings guidance, and now sees adjusted EPS of between $3.25 to $3.65 for the year, down from the previous guidance range of between $3.65 to $3.90.
Nordstrom cited “executional misses” with customers at the beginning of the year for the tepid results and plans to drive improvement by resolving issues “associated with the launch of its enhanced loyalty program; further investing in digital marketing; and re-balancing its merchandise assortment to better align with customer expectations.”
Qualcomm (QCOM) was deemed to have unlawfully suppressed competition in the cellphone chip market and garnered excessive licensing fees, a federal judge ruled Tuesday night. The judge’s decision sided with the Federal Trade Commission, which brought an antitrust lawsuit against Qualcomm at the beginning of 2017. Qualcomm was ordered to renegotiate licensing agreements with customers, license patents to rivals at fair prices and avoid signing exclusive supplier agreements with phone-makers that block others from selling chips into the devices.
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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