Dow Jones futures rose early Tuesday, along with S&P 500 futures and Nasdaq futures, after President Donald Trump said late Monday that we’ll “know in three or four weeks” if China trade talks succeed. Earlier Monday night, the U.S. detailed plans to impose 25% tariffs on the remaining $300 billion worth of Chinese goods. That would further escalate the China trade war and slap penalties on the iPhone and other Apple (AAPL) products made in China.
That comes after the key indexes and Apple stock tumbled through key support levels Monday as Beijing retaliated vs. Friday’s big U.S. tariff hike.
The current stock market rally already had come under pressure last week. Even worse, growth stocks that had held up or rallied last week — such as Zscaler (ZS), HubSpot (HUBS) and Mimecast (MIME) — were notable losers Monday.
To follow the stock market, investors should follow the major averages and the leading stocks. By both measures, the recent action has not been good for the current stock market rally that started after Christmas. This is an important day to read The Big Picture.
Dow Jones Futures Today
Dow Jones futures rose 0.3% vs. fair value, reversing modest losses. S&P 500 futures climbed 0.3%. Nasdaq 100 futures advanced 0.4%. Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.
U.S. Tariffs Planned For $300 Billion More
Late Monday, the U.S. Trade Representative’s Office released plans to impose 25% tariffs on the $300 billion worth of Chinese goods that have not been taxed so far. President Donald Trump has been threatening such a move even as he raised tariffs on $200 billion worth of goods to 25% from 10%.
Trump remained upbeat on China trade talks later in the evening: “We’ll let you know in about three or four weeks whether of not it was successful. … But I have a feeling it’s going to be very successful.”
On Monday morning, Beijing said it would impose tariffs on an additional $60 billion of U.S. goods.
Both sides seem to be digging in after China trade talks broke down. Trump aims to further escalate the China trade war, though the $300 billion in tariffs won’t happen for several weeks at least. But they would mostly hit consumer goods, such as smartphones, computers and textiles. That suggests that the Apple iPhone would finally face a stiff penalty, likely hurting Apple and U.S. customers.
Apple stock fell a fraction in late trading Monday, weighing on Dow Jones futures as S&P 500 futures and Nasdaq futures. During Monday’s stock market trading, shares skidded 5.8%, falling below their 50-day and 200-day lines. That’s after Apple stock tumbled last week to close below its 197.97 buy point. At its intraday low Monday, Apple was 7.6% below that entry, an automatic sell signal.
Current Stock Market Rally
The current stock market rally took a serious beating Monday, especially after last week’s sharp losses. The Dow Jones fell 2.4%, plunging through its 200-day line. The S&P 500 index skidded 2.4% and the Nasdaq composite lost 3.4%, both knifing through their 50-day averages.
But beyond the major indexes and big-name losers like Apple stock, a big concern for the current stock market rally was the performance of leading growth stocks, especially software stocks like Zscaler that had looked strong last week. Zscaler stock, which broke out Friday, tumbled 7.4% Monday, erasing all of Friday’s 7.2% gain. Workday (WDAY), Coupa Software (COUP), HubSpot stock and Mimecast stock all fell below buy points.
Email security services provider Mimecast reported mixed earnings late Monday, with shares tilting lower after hours.
Among the best ETFs, Innovator IBD 50 (FFTY) slid 3.9% on Monday. The iShares Expanded Tech-Software Sector ETF (IGV) fell 3.8%. VanEck Vectors Semiconductor (SMH), which took a beating last week, fell 4.7% Monday.
What To Do Now
The current stock market has been driven by China trade-war news. It’s possible that trade talks will resume, triggering a quick market rebound. But if the China trade war holds or intensifies, the stock market rally could suffer much bigger losses. Investors should rein in their portfolio, take profits on at least some stocks, and be quick to cut losses.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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