Stocks Rebound After Tumbling Amid Worries Over U.S.-China Tensions

Based on the reports of a Chinese technology executive being arrested in Canada, the US stock markets plunged but recovered most of their loses. The arrest of Meng Wanzhou, the chief financial officer of Chinese telecom giant Huawei, escalated the already tension ridden relationship between the US and China just as the two sides have been making efforts to work together to ease their trade war.

The Dow Jones industrial average at one point yesterday was down more than 750 points, about 3 percent.  Although closing down at the end of day at 79 points or near 0.3 points, the blue chip index rebounded, while the S&P 500 finished up the day at less than 0.2 percent with Nasdaq closing up at 0.4 percent.

What caused the bounce back were reports from The Wall Street Journal that Federal Reserve officials are considering whether to “signal a new wait-and-see mentality” on interest rates after their Dec.18-19 meeting.

It’s been volatile this week for the stock market with the Dow falling 799 points on Tuesday and US markets closing on Wednesday in honor of the funeral of former President George H. W. Bush.

Then Wanzhou was arrested by Canadian authorities at the request of the US who is seeking extradition, accusing Wanzhou of violating the US sanctions on Iran.

This action comes at an inopportune time as the US and China are working to come to agreements on trade which would diffuse the long-standing tensions and grievances between them.

“I think investors are really worried about a global slowdown,” Jack Ablin, the chief investment officer at Cresset Wealth Advisors, told NPR. And the arrest “personified the power struggle between the United States and China,” he said.

There are other pressures influencing the financial markets too.

Such as the rise of interest rates on some short-term US treasury security above longer-term instruments. This is known as an inversion of the yield curve and is an unusual phenomenon which hasn’t happened since 2007, and may be a  signal for the slowing down of growth and even into a recession.

And with the signs of slowing growth in the global economy the price of oil as well has weakened.

“Notwithstanding all of this recent market turbulence, the market so far this year is essentially flat,” Ablin said. “People tend to lose sight of that. … It’s not as dangerous from a longer-term perspective as it seems over the last few days.”