U.S. stocks opened higher on Monday following optimistic news revolving around U.S.-China trade war news. However, throughout Monday, markets began to plunge, as the Dow Jones Industrial Average plummeted by over 400 points.
Equities were up following the news that a trade deal between the U.S. and China was nearing completion. Many investors, however, decided to sell following the positive news and argued that the indexes has already accounted for an agreement between the two nations, according to CNBC.
Sources told CNBC, that negotiations between the U.S. and China are in the “final stages” as the two sides prepare for a possible summit at Mar-a-Lago at the end of March. If the negotiations are successful, the U.S. could roll back tariffs on at least USD 200 Billion in Chinese goods while China would remove tariffs on specific industries such as automotives.
However, the U.S. wants the ability to reinstate the tariffs on Chinese goods if the talks are to fail.
"The news has been priced into U.S. equities," said John Davi, Chief Investment Officer at Astoria Portfolio Advisors. "But if you take a step back, positioning is still pretty light in U.S. equities, so even though we think everything is priced in, we could rally a little bit more. People haven't re-risked their portfolios since December. If you look at fund flows … it's still very light on the positioning side for U.S. stocks."
The S&P 500 edged lower by 27 points or almost 1%, while the Nasdaq Composite fell by 60 points or 0.8% late Monday afternoon.
The U.S. and China have been back and forth on talks regarding the trade war tensions for the past year, which has impacted global markets heavily. The tariffs imposed by the two nations affected many sectors such as automotives, technology, and agriculture.
The mixed news between the two have troubled many large corporations such as Apple (NASDAQ: AAPL) and Nvidia (NASDAQ: NVDA). The unsettling economic conditions in China resulted in the two companies to slash their guidances for their previous quarter.
The overall market decline sent many technology stocks lower on Monday. Tesla (NASDAQ: TSLA) shares plunged by 3.5% to USD 28.41 per share. Netflix (NASDAQ: NFLX) shares fell by 1.64% to USD 351.38 per share while Advanced Micro Devices (NASDAQ: AMD) slipped by 1.41% to USD 23.34 per share.
Markets also retreated back following the Commerce Department announcement that construction spending dropped by 0.6% in December. Refinitiv analysts consensus called for a gain of 0.2% during the period.