24/7 Wall St.

The stock market indexes were taking it on the chin on Monday after President Donald Trump tweeted that new tariffs will go into effect shortly if trade talks with China do not result in a deal. The indications were that China was basically trying to renegotiate or backpedal away from the terms.

24/7 Wall St. has looked at several of the key “China beneficiaries” if trade talks result in a favorable trade deal. Most are U.S.-based, but not all. If a trade deal falls apart, these are all likely to feel more pain ahead.

It is important to understand that even on Friday the outcome of the negotiations over the past few months was expected to result in a deal. The issue hanging things up had seemed to continue to be around China’s recognition and treatment of intellectual property of companies doing business in China or being knocked-off by Chinese competition with lower-cost or identical goods.

Monday’s reaction had Nasdaq futures down almost 2%, and the Dow Jones industrials were indicated to open down 1.8% and the S&P 500 to open down 1.6%. Things were worse in China, with the Hang Seng (Hong Kong) down 2.9% and the SSE Composite (Shanghai) down a sharper 5.58%. The two tweets from @realDonaldTrump on Sunday said:

….of additional goods sent to us by China remain untaxed, but will be shortly, at a rate of 25%. The Tariffs paid to the USA have had little impact on product cost, mostly borne by China. The Trade Deal with China continues, but too slowly, as they attempt to renegotiate. No!

— Donald J. Trump (@realDonaldTrump) May 5, 2019

Here is a look at the opening indications for lower share prices based on the trade talk issues that have come to pass.

Alibaba Group Holding Ltd. (NYSE: BABA) is of course not a U.S. company, but it is a key cross-border trader in Asia and in Hong Kong and Mainland China. After rising 2.5% to $195.21 on Friday, Alibaba shares were indicated to open down 4.5% at $186.50.

Apple Inc. (NASDAQ: AAPL) has a lot to lose if trade talks go belly up. Its warning in January was after things had fallen apart in China, and its most recent earnings pop was aided by (but not solely based on) a recovery in China. Apple share closed up 1.2% at $211.75 on Friday, and it was indicated down 2.9% at $205.60 in early indications on Monday.

Boeing Co. (NYSE: BA) had some negative news about what was known and when about the 737 MAX control issues, but it is also a key winner if trade relations are not hostile because of the number of jets that China has on order and that it can keep ordering in the years ahead (even if it has started making its own planes). Boeing shares closed up 0.2% at $376.46 on Friday and the stock was indicated down 2.7% at $366.25 on Monday morning.

Caterpillar Inc. (NYSE: CAT) is one of the key global growth stories that will do well if trade relations are good and not so well if trade talks implode. After closing up almost 3% at $139.06 on Friday, Caterpillar was indicated down 3.2% at $134.55 in Monday’s early indications.

General Electric Co. (NYSE: GE), like 3M Co. (NYSE: MMM), has faced problems of late that seemed to be with or without China previously. After a small 0.25% rise to $185.22 on Friday, 3M was indicated was down 1.5% at $182.50. Its shares of GE were indicated down 2.1% at $10.28, after a 2.4% gain to $10.50 on Friday.

General Motors Co. (NYSE: GM) was taking it harder than rival Ford on the news. GM shares closed up 1.4% at $38.80 on Friday, and the stock was trading down 2.7% at $37.75, based on the Monday premarket trading.

There is also the iShares China Large-Cap ETF (NYSEARCA: FXI) as the main China ETF, with 28 million shares trading each day. It closed up 1.8% at $44.91 on Friday and had recovered from a 52-week low of $37.85 based on continued hope and communication that China trade talks would result in a deal. This ETF was last seen trading down 3.6% at $43.27 on early Monday morning.

Qualcomm Inc. (NASDAQ: QCOM) is taking it harder than most chip stocks, in part because its intellectual property needed to be protected and also because it has been up the most recently after settling with Apple. Qualcomm closed up about 2.5% at $89.29 on Friday and was indicated down 3.4% at $86.25 on Monday.

United States Steel Corp. (NYSE: X) was up 17% at $16.88 after Friday’s earnings were strong enough that it may have created a favorable rerating of the steel sector. Unfortunately, it was last seen trading down 2.5% at $16.45 in early trading on Monday. It had just hit a 52-week shortly before earnings.

Again, these are just some of the movers on the news.