The U.S. & China May Be At An Impasse On Removing Tariffs

Plus, Fed chairman Powell said the central bank isn’t likely to adjust interest rates anytime soon, public hearings began in the Trump impeachment inquiry, and Google could be about to start offering checking accounts.

Stocks slipped lower Wednesday morning with the Dow trading 52 points lower, or 0.2%. The S&P 500 and Nasdaq both dropped 0.3%.

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The Wall Street Journal reported late yesterday that the U.S. and China are at an impasse over tariffs as they continue to negotiate ahead of the signing of the limited phase one trade deal. According to the Journal, there’s debate is whether the U.S. should remove existing tariffs or would simply cancel duties that are scheduled to go into effect on December 15. The report came just hours after President Donald Trump’s speech to the Economic Club of New York where he said that China was “dying” to make a trade deal and that a trade deal “could happen soon.” “If we don’t make a deal, we’re going to substantially raise those tariffs,” Trump said in the speech. “They’re going to be raised very substantially. And that’s going to be true for other countries that mistreat us too.”

Federal Reserve Chairman Jerome Powell testified to Congress this morning and said the central bank is unlikely to adjust interest rates anytime soon assuming the economy remains on its present path. “We see the current stance of monetary policy as likely to remain appropriate as long as incoming information about the economy remains broadly consistent with our outlook of moderate economic growth, a strong labor market, and inflation near our symmetric 2 percent objective,” Powell said in prepared remarks. “Looking ahead, my colleagues and I see a sustained expansion of economic activity, a strong labor market, and inflation near our symmetric 2 percent objective as most likely. This favorable baseline partly reflects the policy adjustments that we have made to provide support for the economy.” Powell did say that the central bank will act as appropriate should the economic picture change saying, “We will be monitoring the effects of our policy actions, along with other information bearing on the outlook, as we assess the appropriate path of the target range for the federal funds rate. Of course, if developments emerge that cause a material reassessment of our outlook, we would respond accordingly. Policy is not on a preset course.”

The first public hearing in the Trump impeachment inquiry began this morning with the House Intelligence Committee hearing testimony from two State Department officials, acting U.S. ambassador to Ukraine, William Taylor, and assistant secretary of State in the European and Eurasian bureau, George Kent. Taylor testified that he wrote in a text message to Gordon Sondland, the Ambassador to the European Union, “that withholding security assistance in exchange for help with a domestic political campaign in the United States would be crazy. I believed that then and I believe that now.” In his testimony, Taylor also described a previously unknown call described to him by a staff member that he says he learned of after his closed-door testimony last month. “Last Friday, a member of my staff told me of events that occurred on July 26,” Taylor testified. “While Ambassador Volker and I visited the front [in late July], this member of my staff accompanied Ambassador Sondland” to a meeting with Ukrainian official in Kiev. “Following that meeting, in the presence of my staff at a restaurant, Ambassador Sondland called President Trump and told him of his meetings in Kyiv. The member of my staff could hear President Trump on the phone, asking Ambassador Sondland about ‘the investigations.’ Ambassador Sondland told President Trump that the Ukrainians were ready to move forward,” Taylor continued. “Following the call with President Trump, the member of my staff asked Ambassador Sondland what President Trump thought about Ukraine. Ambassador Sondland responded that President Trump cares more about the investigations of Biden, which Giuliani was pressing for.”

Google is venturing further into the banking business. The online search giant is said to be gearing up to offer checking accounts next year, with the project being run by Citigroup and the Stanford Federal Credit Union. Previous efforts by Google in the space have focused on credit cards and payment platforms. According to Google’s Caesar Sengupta, the company does not intend to sell consumers’ data, “If we can help more people do more stuff in a digital way online, it’s good for the internet and good for us.” Senator Mark Warner, D-Virginia, said to CNBC, “I’m concerned when we got, whether it’s [Facebook’s] libra or the Google proposal, …these giant tech platforms entering into new fields before there are some regulatory rules of the road. Because once they get in, the ability to extract them out is going to be virtually impossible.”

Apple announced its newest MacBook Pro laptop this morning. The 16-inch Pro model features a completely redesigned keyboard and will start a $2,399.99. The company also announced its latest Mac pro – Apple’s most powerful computer ever. The Mac Pro is geared toward professionals who require a very powerful machine and is capable of editing six 8K videos at a time. The new desktop computer has a starting price of $5,999.

Stocks We’re Watching

D.R. Horton (NYSE: DHI): D.R. Horton shares jumped as much as 5.7% yesterday after the homebuilder reported better-than-expected fiscal Q4 results. The company reported earnings per share of $1.35 on revenue of $5 billion, compared to analysts’ estimates of earnings per share of $1.25 on revenue of $4.8 billion. “Over the last five years, we have grown our revenues by 119% and our earnings per share by 186%, while also generating $4 billion of cash flows from homebuilding operations, significantly increasing returns on inventory and equity and reducing our debt,” said Chairman Donald R. Horton. 

Tyson Foods (NYSE: TSN): Tyson Foods shares jumped nearly 8% yesterday despite the company reporting earnings that mostly missed estimates. However, profit margins for the U.S. beef processor set record highs as beef prices have soared, and the company was positive about its future. “We expanded our global footprint, launched innovation in our iconic brands and our new alternative protein brand, and prepared for future growth by investing in technology and infrastructure,” said CEO Noel White in he earnings release. White also said that the company is “optimistic” about its fiscal 2020. “Currently, we expect to meet or exceed our long-term target of high-single digit adjusted earnings per share growth,” White added.

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