Dow falls 558 points after Trump advisers simultaneously contradict each other on trade

Posted: 4:12 PM, Dec 07, 2018
Updated: 2018-12-07 16:12:52-05

Wall Street does not like the mixed messages coming out of the White House on trade.

The Dow fell 600 points, or 2.4%, on Friday afternoon. The Nasdaq plunged 3%, while the S&P 500 retreated 2.4%.

The Dow closed for the day down 588 points.


While White House economic adviser Larry Kudlow sounded an optimistic note  about China talks on CNBC , trade adviser Peter Navarro was simultaneously warning on CNN of higher tariffs if issues aren't resolved during the 90-day negotiating period.

"We've gotten a hodge-podge of mixed messages from people in the same administration," said Art Hogan, chief market strategist at B. Riley FBR. "We're not sure who we're supposed to listen to."

Investors also received a softer jobs report on Friday. The Labor Department said the United States  added 155,000 jobs in November , missing expectations for a gain of 200,000. But the labor news did not trigger a selloff and some traders likely figured the slowdown in hiring will reduce pressure on the Federal Reserve to raise interest rates.


"It doesn't feel like much of a ceasefire," said Ed Yardeni, president of investment advisory Yardeni Research.

Good-cop, bad-cop


Kudlow told CNBC on Friday that the trade talks with China are "extremely promising."

Kudlow, director of Trump's National Economic Council, said that Trump has indicated he might be willing to extend the 90-day negotiating window if there's "good, solid movement and good action."

Navarro, the trade hawk of the White House, struck a different tone on CNN. Asked whether the administration would walk away if issues with China are not resolved within 90 days, Navarro suggested Trump would "simply raise" existing tariffs on $200 billion worth of Chinese goods.

If China fails to change its ways on trade, "we have a president that's going to stand up to that for once," Navarro said.

Navarro also championed the nearly $12 billion that the United States has raised from tariffs, even though that money is being mostly paid by American consumers and businesses.

The comments didn't lift the uncertainty on Wall Street. Trade-sensitive stocks including Apple ( AAPL ), Boeing ( BA ) and Caterpillar ( CAT ) retreated more than 2%.

"We keep getting conflicting reports out of those guys," said Joe Saluzzi, co-head of trading at Themis Trading. "The markets are confused."

Trump himself has added to the confusion. While Trump has spoken of a desire to make a deal with China, the president also alarmed some investors by calling himself a "Tariff Man" on Twitter on Tuesday. That tweet was blamed for helping to send the market plunging.

Yet on Thursday evening, Trump said on Twitter that he agrees with a recent encouraging statement from China expressing confidence of a trade agreement within 90 days.

"Today is a microcosm of what we've had all week: mixed messages," said Hogan. "Every message has contradicted itself."

Hogan pointed to the confusion over a central issue: when the 90-day clock on negotiations began. At first, Kudlow suggested the period began on January 1. The  White House later corrected Kudlow  to clarify that 90 days began the date of the dinner, December 1.

The stock market would have dropped more on Friday if it weren't for a rally in the energy sector. Oil stocks like EOG Resources ( EOG ) and Anadarko Petroleum ( APC ) were bid higher after  OPEC and its allies reached a deal  to significantly cut production. US oil prices closed 2% higher on the news.