Wall Street sinks as China responds to US tariffs

Summary:
- China strikes back with announcement of tariffs on $60 billion of US goods
- Indices from Wall Street feel the pain from trade tensions
- Insys Therapeutics (INSY.US) said it may have to file for bankruptcy protection

Moods on the global equity markets are sour on Monday and there are good reasons for it. Trade tensions continue to pressure stock valuations all over the world and recent developments do not bode well for the future either. In turn, all three major stock market indices from Wall Street opened lower on the first trading day of the week.

S&P 500 (US500) took a major dive lower on Monday taking out both 50-session moving average (green line) and the support zone ranging above the 2865 pts handle. The US index futures touched the 2815-2825 pts support zone in the pre-session trade and one cannot rule out a retests in the hours to come. Note that in case bears overcome this hurdle, the downward move could extent to as low as to 200-session moving average (purple line, 2775 pts at press time). Source: xStation5

No solution to the ongoing US-China trade conflict was found over the weekend and a streak of tweets from Donald Trump on Monday morning hinted that the United States are not backing down - the US President warned China not to retaliate or it will get worse. However, Chinese foreign ministry said in the morning that his country will not bow to foreign pressure and it did not. China announced it will impose tariffs on 5000 US products worth a total of $60 billion. Tariff rates will vary by product and fall into 5-25% range. Full list of US goods is yet to be disclosed but what we know now is that tariff on LNG imports will increase from 10% to 25%. However, according to tweet from Global Times’ Hu Xijin products target may include those of the US major exporters like Boeing (BA.US), Caterpillar (CAT.US), NVIDIA (NVDA.US) or Intel (INTC.US). Having said that, those companies are likely to enjoy elevated volatility throughout today’s session.

Apart from that, another threat for the US companies is looming. The US President Donald Trump is expected to make a decision concerning tariffs on the EU cars until 18 May. The European officials announced today that they had almost finished making a list of the US goods that will be subject to retaliatory levies in case the United States imposes tariffs on the European cars. In this case the goods included were not disclosed either but Cecila Malmstrom, the European Commissioner for Trade, warned today that they will be imposed immediately after the US ones so we might get to details on the weekend.

Companies with the biggest exposure to the ongoing trade war are leading Dow Jones lower on Monday. Source: Bloomberg

Company News

Insys Therapeutics (INSY.US) is one of the worst performing companies on Wall Street today. The US drugmaker is suffering from the aftermath of the opioid crisis breakout. Former executives of the company are facing trial and the company has reached a $150 million settlement with the US Department of Justice. However, Insys announced today that legal costs has eaten up through its cash pile and the company is left with $87.6 million in cash against $240.3 million of liabilities. In turn, the company said that it may be forced to file for bankruptcy protection. Stock is down 70% against Friday’s close and trades 97% lower against ATH from 2015.

Lower valuation of Uber’s (UBER.US) IPO was said to be the aftermath of the lacklustre performance of Lyft (LYFT.US) when it debuted. However, even with a lower IPO share price the cash-burning company failed to attract investors’ appeal and moved lower. The US ride-sharing giant continues to be pressured on Monday and traded almost 9% lower at the beginning of the session.

Apple (AAPL.US) is the worst performing Dow Jones member at the beginning of the US session. While its products were not named specifically in any of today’s news, the company suffers from trade war escalation as it generates 20% of revenue in China and companies from the Asian country are among Apple’s biggest suppliers. Apart from that, it was announced today that Apple has lost a case in the Supreme Court and now customers can sue the company over artificially inflating prices on AppStore.

Stunning rally on the US stock market allowed Apple (AAPL.US) to climb back above the 200-session moving average (purple line) after major price declines in the second half of 2018. However, the stock failed to retest last year’s highs as trade tensions once again began to roil markets. In turn, a downward move was launched and with today’s lower opening the company found it self back below the aforementioned moving average. In case the downward move is continue, next support zone can be found around the 38.2% Fibo level ($182.50-184.00). Source: xStation5