Trade Worries, Earnings Optimism Seem to Vie for Upper Hand on Wall Street

Equities futures were pointing to a lower open for all three major U.S. indices after the Trump administration threatened $200 billion in new tariffs on Chinese goods.

Print Street Morning
5 min read

Key Takeaways

  • Dollar higher, 10-year Treasury yield lower, potentially signaling a risk-off mood
  • Copper, often seen as a measure of economic health, has been hard hit recently
  • Stocks rose yesterday, apparently helped by optimism about earnings season

(Wednesday Market Open) Wall Street appears to be of two minds. Excitement over another potentially bumper earnings season seems to be competing with international trade worries for influence over the market’s direction.

Today, it seems that the latter has the upper hand as equities futures were pointing to a lower open for all three major U.S. indices after the Trump administration threatened $200 billion in new tariffs on Chinese goods. That’s after both countries slapped $34 billion in tariffs on each other last week.

The escalating business tensions between the world’s two largest economies has had Wall Street on edge for months as investors seem to be worrying about the trade dispute crimping global growth.

Moving to Risk-Off?

The most recent round of trade concerns look to be affecting not just U.S. equities, but markets across the globe. Two of China’s benchmarks, the CSI 300 and the Shanghai Composite, both fell 1.8% overnight. The MSCI Emerging Markets Index added to its recent weakness, falling nearly 1%.

As trade worries flared up, investments traditionally seen as providing a measure of safety in uncertain times rose. Rising demand for 10-year Treasuries pushed the yield lower. Bond prices and yields move in opposite directions. Meanwhile, the U.S. dollar index, which measures the greenback against a basket of other currencies, also rose. Gold, also considered a haven investment, was lower, but that was likely because of the strength in the greenback, which can dampen demand for dollar-denominated gold.

For those who look to the commodities markets for signs of potential economic strength and weakness, copper (see figure 1 below) has been especially hard hit in recent days. The industrial metal, often seen as an indicator for global economic activity, fell as much as 3.5% since the start of the week.

Looking Toward Earnings

U.S. stocks finished higher Tuesday, with all three major indices in the green and the S&P 500 (SPX) hitting its highest close since Feb. 1 as optimism about Q2 earnings seemed to help sentiment.

Although it is early going, many analysts have indicated that they are expecting this earnings season to be another strong one, and it appears the market may have had firmer footing on Tuesday in anticipation of that, especially after PepsiCo’s (PEP) strong results.

Earnings season could provide investors with a counterpoint to international trade news, which has weighed on the market due in large part to worry about global economic growth. In this atmosphere, the conference calls accompanying earnings releases could be particularly important for sussing out nuance.

Consumer Staples, Utilities Rise

Consumer staples was the best performing S&P sector on Tuesday with a 1.26% jump. PepsiCo (PEP) was the leader there, with a 4.76% gain as the soft drink and snack food mainstay said it earned an adjusted $1.61 a share in Q2, beating the average Wall Street analyst estimate. Revenue of $16.09 billion rose 2% from a year earlier and also beat forecasts. Snack food sales looked strong, but the company’s core beverage business seemed a bit flat.

Consumer staples may have also got a bit of a bid as investors could have been looking for value. The sector had been down more than 9% year to date through Monday.

Another sector that did well Tuesday was utilities, which is interesting because it marked another sector that, like consumer staples, is often considered defensive yet was up on a day that was generally positive for other sectors too. In fact, of the S&P 500 sectors, only financials were in the red yesterday.

Part of the strength in utilities Tuesday could simply be some bargain hunting after the previous session’s slide. But investors may also be eying the sector for its yields compared to government bonds. With the yield on the 10-year Treasury below 3%, utilities that are offering higher dividend yields can be attractive given that they are also often viewed as relatively safe investments.

FIGURE 1: PAGING DR. COPPER.  Trade tensions appear to have taken a toll on the copper market. The metal is often seen as a leading indicator for the global economy, due to its various industrial uses. Data source: CME Group. Chart source: The thinkorswim® platform from TD Ameritrade. For illustrative purposes only. Past performance does not guarantee future results. Chart Source: The thinkorswim® platform from TD Ameritrade. For illustrative purposes only. Past performance does not guarantee future results. 

Consumer Staples Q2 Earnings: The consumer staples sector led the S&P 500 sectors higher Tuesday, but that dynamic may not prove true with Q2 earnings per share results. As of Friday, S&P Capital IQ consensus estimates project the sector will post a 7.6% gain in Q2 EPS compared to a 19.5% jump for the S&P 500 as a whole, according to investment research firm CFRA. The underperformance could be because of the more-stable demand inherent in the sector, slow category growth in some food categories, drug reimbursement pressures, increased taxes on tobacco products, rising input costs including crop inflation, higher freight expenses and wage increases, CFRA said. Still, the sector was likely in growth mode during Q2 as those headwinds were countered by increased consumer spending, improved pricing power, cost savings and a reduced effective tax rate, the firm said.

Producer and Consumer Prices In Focus: After today’s report on producer prices, the market is looking toward another inflation reading tomorrow in the form of consumer price data. The core consumer price index, which strips out volatile food and energy prices, is expected to show a rise of 0.2% for June, according to a consensus of economists polled by Although the Fed has telegraphed the increased likelihood of a fourth rate hike this year, that’s still not set in stone. As of Tuesday afternoon, the Fed funds futures market was showing an 82.3% probability of a rate hike in September but only a 55% chance of another one in December. 

Looking Toward Bank Earnings: On Friday, JPMorgan Chase (JPM), Citigroup (C), and Wells Fargo (WFC) are scheduled to report earnings. Their financial performance and leadership comments could offer some clues into how the financial sector as a whole performed in the second quarter and whether the wider market could take directional cues from the sector during this earnings season. A 10-year Treasury yield under 3% and a flattening yield curve seem to be headwinds for the banks. Fear apparently is helping to pressure yields on longer dated bonds, while there seems to be uncertainty for investors in shorter term Treasuries as to whether trade issues could derail the Fed’s plan to gradually raising its key interest rate. So it could be interesting if bank company leadership expresses sentiment suggesting the 10-year yield might move meaningfully above that 3% level this year. Investors may also want to pay attention to banks’ trading revenues in the most recent quarter compared with Q1.

Good Trading, 



Helpful Educational Content and Programming
  • Check out all of our upcoming Webcasts or watch one of the many archived ones, covering a wide range of topics from market commentary to portfolio planning basics to trading strategies for active investors. No matter your experience level, there’s something for everybody.
  • Looking to stay on top of the markets? Check out the TD Ameritrade Network, which is live programming that brings you market news and helps you hone your trading knowledge.
  • Plus, there’s a new playlist on the TD Ameritrade YouTube Channel: Introduction to Volatility, featuring recent content from the TD Ameritrade Network.

The TD Ameritrade Network is brought to you by TD Ameritrade Media Productions Company. TD Ameritrade Media Productions Company and TD Ameritrade, Inc. are separate but affiliated subsidiaries of TD Ameritrade Holding Corporation.

Economic Calendar for this week. Source:
Call Us

TD Ameritrade and all third parties mentioned are separate and unaffiliated companies, and are not responsible for each other’s policies or services.  

Inclusion of specific security names in this commentary does not constitute a recommendation from TD Ameritrade to buy, sell, or hold.


Market volatility, volume, and system availability may delay account access and trade executions.

Past performance of a security or strategy does not guarantee future results or success.

Options are not suitable for all investors as the special risks inherent to options trading may expose investors to potentially rapid and substantial losses. Options trading subject to TD Ameritrade review and approval. Please read Characteristics and Risks of Standardized Options before investing in options.

Supporting documentation for any claims, comparisons, statistics, or other technical data will be supplied upon request.

The information is not intended to be investment advice or construed as a recommendation or endorsement of any particular investment or investment strategy, and is for illustrative purposes only. Be sure to understand all risks involved with each strategy, including commission costs, before attempting to place any trade. Clients must consider all relevant risk factors, including their own personal financial situations, before trading.

This is not an offer or solicitation in any jurisdiction where we are not authorized to do business or where such offer or solicitation would be contrary to the local laws and regulations of that jurisdiction, including, but not limited to persons residing in Australia, Canada, Hong Kong, Japan, Saudi Arabia, Singapore, UK, and the countries of the European Union.

TD Ameritrade, Inc., member FINRA/SIPC. TD Ameritrade is a trademark jointly owned by TD Ameritrade IP Company, Inc. and The Toronto-Dominion Bank. © 2018 TD Ameritrade.

Scroll to Top