The Dow slipped into the red in early trading Tuesday, as global stocks were weaker in the face of escalating geopolitical tensions.
While the Dow opened 0.1%, or 15 points higher, it pared those gains in the first minutes of trading and slipped into negative territory. The S&P 500 was down 0.2% and the Nasdaq Composite fell 0.3%. The Dow’s record close remains in sight just one day after it inched ever closer to its all-time closing high.
Asian markets closed lower and European equities like the pan-European Stoxx 600 Index are in the red.
Investors’ attention is divided three ways: geopolitics, trade and monetary policy.
Tensions between the United States and Iran escalated after President Donald Trump levied new sanctions on Monday. Iran shot down a US drone in international airspace last week, prompting the latest altercation between Washington and Tehran.
Although riskier investments including stocks are suffering in this environment, safe-haven assets like gold continue to climb higher. A weaker US dollar also helps the precious metal. Gold prices were up 1% at $1,428.60 an ounce early Tuesday, according to Refinitiv.
Investors are still anxiously awaiting the meeting between Trump and China’s President Xi Jinping at the G20 summit in Japan this week, which could herald the next phase of trade negotiations.
If trade talks between the United States and China fell apart, “it would immediately raise the risk of a global slowdown and may lead to sharp falls in equity prices,” said Fawad Razaqzada, technical analyst at FOREX.com. However, that’s not Razaqzada’s base case.
He believes a full trade agreement remains highly unlikely, but the leaders of both countries will probably make a commitment to resume talks in July.
“This would be seen as a positive outcome,” he wrote, especially if it’s accompanied by a reduction of the tariffs — or at least a delay imposing new tariffs on $300 billion worth of Chinese goods, as the Trump administration is considering.
Federal Reserve Chairman Jerome Powell is set to give a speech on the economic outlook and monetary policy at 1 pm ET. The market expects the central bank to cut interest rates for the first time since the aftermath of the financial crisis next month. Powell’s speech will be scrutinized for clues.
Trump criticized Powell’s Fed once again on Monday, saying in a tweet that interest rates had been raised too quickly.
This story has been updated
