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Day Ahead: Top 3 Things to Watch

Stock MarketsAug 08, 2018 04:21PM ET
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© Reuters. China and the U.S. show no signs of backing down on trade. - Here’s a preview of the top 3 things that could rock markets tomorrow.

1. Trade War Worries Aren’t Going Away

While earnings season’s grip on market direction loosens, trade’s impact on stocks persists.

It could be argued that the U.S. and China are now officially in a trade war (if they weren’t before). The two sides aren’t talking and China is hitting back at every U.S. salvo.

Today, the Chinese Ministry of Commerce said it will impose a 25% charge on $16 billion worth of U.S. goods, raging from fiber optic cables to vehicles. The announcement from China comes after the Trump administration followed through with a 25% tariff on an additional $16 billion of Chinese goods Tuesday evening.

“This is very unreasonable,” China’s ministry said in a statement. “In order to defend China’s rightful interests and the multilateral trade system, China has to retaliate as necessary.”

That takes the total of targeted goods to $50 billion on each side. China’s tariffs are slated to come into effect on Aug. 23.

From the market perspective, the longer this continues, the tougher it will be for Wall Street to find clear direction. Apart from the effects of tariffs on the bottom lines of companies, stocks will be subject to swings every time there are reports or statements that signify escalation or easing of the trade battles.

2. Market Will Be Hoping for Tame Inflation

Macro makes a comeback tomorrow after a very brief hiatus and investors will have two economic indicators on which to trade.

The featured act is wholesale inflation. Economists expect that the producer price index (PPI) rose 0.2% in July and is up 3.4% year over year. The core PPI, which excludes food and energy, is also expected to post a 0.2% rise on the month, up 2.8% on the year.

The report comes out at 8:30 AM ET (12:30 GMT).

Earlier today, Richmond Fed president Thomas Barkin said that the U.S. central bank should follow through on gradually raising interest rates to more normal levels, given the current strength of the American economy.

“It is difficult to argue that lower than normal rates are appropriate when unemployment is low and inflation is effectively at the Fed’s target,” he said in a speech delivered Wednesday.

Chicago Fed President Charles Evans will speak tomorrow at 9:30 AM ET (13:30 GMT).

Also on the calendar are initial jobless claims at 8:30 AM ET (12:30 GMT). Economists expect just a slight rise in weekly first-time claims from the week before.

3. Media Earnings in the Spotlight

As noted, earnings season is waning, but it’s not completely gone. Media stocks are some of the bigger names issuing results today and tomorrow.

Twenty-First Century Fox (NASDAQ:FOX) reported profit and revenue that topped expectations after hours Wednesday. Those results might help shares of Disney (NYSE:DIS), which is buying Fox's TV and movie studio assets.

Tomorrow, Viacom (NASDAQ:VIAB) reports before the bell. Tronc (NASDAQ:TRNC) will also issue results. And after hours, News Corp (NASDAQ:NWS) will report earnings.

Day Ahead: Top 3 Things to Watch

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