U.S. stocks reversed course and sank Tuesday after a print on consumer confidence came in below expectations and earlier trade hopes were dashed. Reports that Democratic members of Congress would formally announce an impeachment inquiry of President Donald Trump added to investor uncertainty.
Here were the main moves in the market at the end of regular equity trading:
President Donald Trump spoke at the United Nations General Assembly (UNGA), starting at about 10:15 a.m. ET.
In his address to the near 200 member countries of the UN, Trump reaffirmed his stance of more heavily weighing national identity over global ties, saying that, “The future does not belong to globalists.”
Touching on some recent geopolitical concerns, Trump doubled down on his threat to impose further sanctions on Iran. Tensions have flared between the U.S. and Iran, most recently after U.S. officials blamed Tehran for attacks on Saudi Arabian oil facilities.
“No responsible government should subsidize Iran’s bloodlust," Trump said in his speech. "As long as Iran’s menacing behavior continues, sanctions will not be lifted. They will be tightened."
On the U.S.-China trade front, circumstances had improved ahead of Trump’s public remarks. The Chinese government granted new waivers to some state and private companies to purchase soybeans exempt from retaliatory tariffs, according to a Bloomberg report Tuesday morning, citing unnamed people familiar with the situation. Chinese commitments for more U.S. agricultural purchases have been a key sticking point in the path to a trade deal between the two nations.
But in his remarks Tuesday, Trump restated his criticisms of China’s trade practices, diminishing hopes that the olive branches the U.S. and China had exchanged to de-escalate tensions in recent weeks would have been enough to push negotiations along when the two sides reconvene next month.
Consumer confidence slides in September
Ongoing trade uncertainty has weighed on consumers’ outlooks for the domestic economy, and contributed to the largest drop in consumer confidence in nine months in September.
The Conference Board’s monthly print on consumer confidence fell to a reading of 125.1 in September, down from 134.2 in August. Consensus economists had expected to see a reading of 133 for the month, according to Bloomberg data.
Subindices measuring consumers’ views on current and future labor market and business conditions also deteriorated in September. The Conference Board’s present conditions index fell to 169.0 from 176.0 in August. The expectations index – which comprises 60% of the headline consumer confidence print – tumbled below 100 to a reading of 95.8.
“The escalation in trade and tariff tensions in late August appears to have rattled consumers,” Lynn Franco, senior director of economic indicators at The Conference Board, said in a statement. “However, this pattern of uncertainty and volatility has persisted for much of the year and it appears confidence is plateauing.”
“While confidence could continue hovering around current levels for months to come, at some point this continued uncertainty will begin to diminish consumers' confidence in the expansion,” Franco added.
EU rulings
Shares of big tech companies were bid higher Tuesday after court rulings favoring Alphabet’s Google (GOOGL, GOOG) and Starbucks (SBUX) were interpreted constructively for other firms in similar legal positions.
Alphabet’s Google will not have to extend so-called “right to be forgotten” rules outside of EU member states, based on a decision by the top court in the EU.
The right to be forgotten rule was created in Europe in 2014 and requires that Google remove search engine links to sensitive information upon users’ requests. A French privacy regulator had fined Google in 2016 for failing to de-reference these sensitive links outside of the European bloc as well.
But based on the new ruling, only EU member states will be subject to the 2014 right to be forgotten rule. The ruling also included a requirement, however, that Google implement safeguards to discourage users from leaving the EU in order to find the information.
Traders work on the floor at the New York Stock Exchange (NYSE) in New York, U.S., September 18, 2019. REUTERS/Brendan McDermid
Meanwhile, two separate tax-related EU court decisions for Starbucks and Fiat Chrysler (FCAU) may hint at the outcome for a similar ongoing legal battle for Apple (AAPL).
On Tuesday, the EU General Court overturned an EU Commission decision that had said Starbucks benefited from illegal tax breaks in the Netherlands. This would have required that the coffee giant pay 30 million euros in unpaid taxes. The European Court of Justice – the EU’s highest court – can still appeal the Tuesday decision, however.
Fiat Chrysler, on the other hand, lost its fight against a demand to pay a similar amount in back taxes to the government of Luxembourg. In its ruling Tuesday, the EU General Court upheld a EU Commission decision that Fiat had benefitted from selective tax arrangements in the country.
These differing court decisions are likely to be closely watched by Apple. The tech giant remains caught in the crosshairs of a similar EU tax crackdown and had been ordered in 2016 to pay 13 billion euros in back taxes to Ireland.
Pound jumps amid hopes of averting no-deal Brexit
Elsewhere, the 11 judges of UK’s top court unanimously decided Tuesday that Prime Minister Boris Johnson’s controversial move to suspend Parliament earlier this month was unlawful.
The ruling called on lawmakers to immediately return to Parliament, laying the groundwork for a challenge to Johnson’s EU exit strategy.
While Johnson has said he would try to renegotiate former Prime Minister Theresa May’s Brexit deal, he planned to leave the EU by the Oct. 31 deadline whether or not negotiations were successful.
The pound jumped 0.4% to 1.2478 per U.S. dollar (GBPUSD=X) immediately following the ruling. However, the currency pared some gains as market participants await further clarity on the next steps forward in the UK attempts to reach an exit deal with the EU.
