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Illustration: Sarah Grillo/Axios
Bullish stock traders have taken just about every opportunity to buy U.S. equities after positive news about developments in the U.S.-China trade war this year, but both the S&P 500 and Nasdaq had their worst day in a month on Tuesday as obstacles to that deal mounted.
What's happening: Stocks reversed earlier gains after President Trump addressed the UN and accused China of failing to keep its promises and engaging in predatory practices that had cost millions of jobs in the U.S. and other countries.
U.S. stocks fell further after Congressman John Lewis committed his support for impeachment proceedings based on reports Trump pressured Ukraine's president to investigate former Vice President Joe Biden and his son by withholding U.S. aid.
Where it stands: The impeachment inquiry House Speaker Nancy Pelosi announced Tuesday doesn't realistically portend a Trump exit from the White House, but it does further cloud what the market can expect from government policy, said Marc Chandler, global market strategist at Bannockburn Global Forex.
Stocks have steadily risen over the course of September, with the S&P edging up by around 3% month to date, while safe-haven U.S. Treasury prices have fallen, pushing yields higher, in a sign of investors' increasing appetite for risk.
By the numbers: U.S. equity ETFs have seen 3 straight weeks of net inflows, culminating with $18 billion of funds for the week ending Sept. 18, according to the Investment Company Institute.
Why it matters: The pickup in stock buying so far this month has been a major reversal of the trend seen in markets for most of the year. Capital flows had largely been going into bonds and money market funds and out of stocks.
The big picture: Without more good news on the trade war, investment flows could reverse out of stocks in the coming weeks and back into bonds. The yield on the benchmark 10-year Treasury note has clearly reversed course after touching 1.90% on Sept. 13, dropping all the way to 1.65% late Tuesday.
The stock market was also stung by a weak U.S. consumer confidence report from the Conference Board on Tuesday.
What they're saying: “The escalation in trade and tariff tensions in late August appears to have rattled consumers,” Lynn Franco, senior director of economic indicators at the Conference Board, said in a release accompanying the data. “[I]t appears confidence is plateauing.”
Yes, but: Consumer confidence remains historically high. The Conference Board's index has yet to fall below 120 in 2019. It had barely risen above 120 in nearly 2 decades prior to 2017.
The housing market continued to slow as mortgage applications fell 10.1% from last week, according to data from the Mortgage Bankers Association’s (MBA) weekly survey.
Why it matters: The MBA survey released this morning follows weak numbers from the Case-Shiller 20-city home price index, which rose just 2% month-over-month in July and did not rise at all on a monthly basis after seasonal adjustments.
The intrigue: Despite a fall in U.S. Treasury yields and the Fed cutting overnight interest rates last week, the average U.S. 30-year mortgage rate ticked up above 4%, MBA's data showed.
Private capital investment in China slowed markedly in the first half of the year, data from the Emerging Market Private Equity Association released Tuesday showed.
The big picture: Emerging markets broadly have suffered, with private equity and venture capital seeing declines of 10% and 32%, respectively, in the period through June, compared to 2018.
But, but, but: The trade group representing EM institutional investors, fund managers and industry advisors also cautioned that the "slowdown in private capital investment activity in the first half of 2019 was more pronounced amid rising trade tensions between major economies and a more uncertain global economic outlook."