Stocks stayed lower by midday Friday. President Trump said he will hold a China-related press conference Friday and Federal Reserve Chairman Jerome Powell said he is more concerned about deflation in the near-term, rather than inflation.
All three major U.S. indices were down, with the S&P 500’s loss at 0.7%. Investors rushed into safety, sending the 10-Year Treasury Yield down to 0.66%, which occurred right around Powell’s deflation comment.
The yield curve between the two-Year and 10-Year Treasuries compressed and bank stocks fell more than 1%. Industrials and consumer discretionaries were also severe underperformers, while growth tech stocks, which investors move into during uncertain times, rose. Amazon (AMZN) - Get Report and Apple (AAPL) - Get Report rose 0.1% and 0.4%, respectively.
President Trump’s call for a conference on China comes as the two nations go through multiple political spats, all of which point towards the possibility of more trade tensions. Investors are worried they’ll hear from Trump that the White House is planning tariffs or planning to hold off on a phase two trade deal.
Another economic negative, Jerome Powell told a Princeton professor that he is worried prices will fall soon, rather than rise. The recent rally in stocks since May 13, lead by cyclical sectors, has been predicated on the fact that investors think the recently successful monetary and fiscal stimulus efforts will bring about stronger inflation.