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Dow Jones Retreats From Highs On Hong Kong Bill, Earnings Reports

After trading around new historic highs on Monday, the Dow Jones traded 102.2 points lower and closed with a 0.36% loss at 27,934.0.

US-China trade negotiations to take a turn for the worse?

The US Senate passing a bill to ban the sale of crowd control munitions to Hong Kong police is the biggest forex news today. This triggered a wave of risk aversion as the Hong Kong Human Rights and Diplomacy Act is seen as a move against the Chinese government. It cannot come at a worse time either. US and China trade negotiations around tariffs have not had any significant development. Market participants think that the bill clouds hopes of the two countries coming into terms with each other.

Of course, threats from US President Donald Trump only fueled risk aversion even more. He threatened to increase tariffs on Chinese goods if they do not have a deal.

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Worse-than-expected earnings reports

Retailers on the stock index also weighed down the Dow.

Home Depot weighed the Dow the most yesterday as it fell 5.4% when it announced lower sales and earnings compared to forecasts. Revenue for the third quarter of the year was lower at $27.22 billion versus $27.72 billion. Same-store sales also missed expectations at 3.6% versus 4.6%.

Kohl’s Corp also dropped by as much at 19.5% when it missed sales and profit estimates. It’s revenue was reported at $4.63 billion while the consensus was at $4.66 billion. Its same-store sales also diappointed the 0.8% estimate at 0.4%.

These reports sparked concerns on consumer spending which also contributed to the market’s risk-off mode.

Dow Jones Outlook

Today, the Dow Jones will likely continue to be dictated by market sentiment. The index could continue to track lower to previous highs around 27,780. On the other hand, if risk appetite improves, we could see the Dow Jones rally beyond the 28,000 psychological handle again and tap new record highs.Download our latest quarterly market outlook for our longer-term trade ideas.

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