Wall Street futures turned lower Thursday, pulling the S&P 500 back from record highs, after a report suggested China is growing increasing doubtful it can reach a comprehensive near-term trade agreement with the United States.
Bloomberg reported that senior officials are worried that U.S. reluctance to rollback tariffs on more than $350 billion on China-made goods, as well as the risk of an impulsive reaction from President Donald Trump that would undo months of constructive trade talks, are making the chances of a near-term agreement more difficult.
The report hit U.S. equity futures hard, turning a modest 30 point gain for the Dow Jones Industrial Average into a projected opening bell decline of around 55 points, and clipped an earlier advance for the S&P 500, which closed at an all-time high of 3,046.77 points last night. The broadest benchmark of U.S. shares is priced for a 5.5 point opening bell decline.
U.S. stock futures had been priced for a solid open prior to the report as investors parsed through details of yesterday's Federal Reserve rate decision and reacted to stronger-than-expected third quarter earnings from tech giants Apple (AAPL) - Get Report and Facebook (FB) - Get Report .
Fed Chairman Jerome Powell told reporters in Washington yesterday that the economy was in a "good place", with stable growth, low inflation and a robust jobs market, even as he laid out his case for making the the rate cut of the year that sets the central bank's target lending range at 1.5% to 1.75%.
"We took this step to help keep the economy strong in the face of global developments and to provide some insurance against ongoing risks," Powell explained. "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."
A tweak in the Fed's statement -- substituting a vow to monitor the effects of its recent moves for a previous reference to "act as appropriate" on rates in the near term -- took the steam out of markets last night, and clipped gains for the U.S. dollar this morning, but the supportive Fed stance, along with what is turning out to be a better-than-expected third quarter earnings season, has kept U.S. stocks near record highs for most of the past two weeks.
With just under 60% of the S&P 500 reporting so far this season, 74.1% of companies have beaten earnings estimates, a figure that is firmly ahead of the long-term average of 65% and largely in-line with the past two years, according to Refinitiv data. The collective bottom line of S&P 500 companies is expected to decline by 1.6% from last year, but that is markedly better than the 2.9.% forecast from just a few weeks ago.
And with U.S.-China trade talks advancing, the economy growing at a near 2% clip and Britain's Brexit drama tamed for the moment with a pre-Christmas election, global investors appear more than content to add to risk positions ahead of tomorrow's October jobs report from the Bureau of Labor Statistics.
Apple shares are likely to be an early mover of note after the iPhone maker said solid services revenues and good demand for its wearable technology drove the group to a stronger-than-expected fourth quarter, and forecast sales of between $85.5 billion to $89.5 billion for the three months ending in December.
Facebook, too, surprised investors with a better-than-expected bottom line of $2.12 per share as ad revenues increased and more users joined its trio of Facebook, WhatsApp and Instagram apps, setting up shares in the social media giant for a record high open on Wall Street later today.
Overnight in Asia, the Fed rate decision, as well as comments from Beijing that suggested the easing of sanctions on U.S. agricultural products, helped regional stocks rise to a fresh three-month high, while the Nikkei 225 added 0.37% to close at a new 52-week peak of 27,927.04 points.
European stocks edged higher at the start of trading in Frankfurt, but reversed those gains to pull the Stoxx 600 0.34% lower as euro held at 1.1161 against a weaker U.S. dollar and investors retreated following the Bloomberg report. Britain's FTSE 100, meanwhile, slumped 1% as the pound climbed to 1.2963 against the greenback.
Global oil prices turned red, as well, following the China report and yesterday's U.S. Energy Department data which showed U.S. crude stockpiles rose 5.7 million barrels in the week ending October 25, with the total topping 438.8 million barrels.
Brent crude contracts for December delivery, the global benchmark, were seen 24 cents lower from their Wednesday close to trade at $60.37 per barrel, while WTI contracts for the same month were marked 77 cents lower at $54.29 per barrel.