NEWS： CSX quarterly reports indicate that trade tensions may hurt business profits
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U.S. stock markets closed down Wednesday amid concerns that the protracted trade war between China and the United States could hurt corporate profits because of weak CSX performance.
Railway freight company CSX (CSX.O) shares plunged 10.3%, the biggest one-day decline since 2008, after the company reported lower-than-expected quarterly earnings and downgraded its full-year revenue forecast. Continued trade tensions led to a drop in truck and rail freight traffic in the first half of 2019.
CSX is one of the biggest drags on the S& P 500 index. The United Pacific Group (UNP.N) and Berkshire Hathaway (BRKb.N), which owns BNSF Railway, also have a big drag on the S&P 500 index. United Pacific Group shares fell 6.1 percent, and the company will report results on Thursday.
Railway shares fell, helping to push down the S&P industrial index, which fell 2.2%, the biggest drop among the 11 major sectors of the S&P 500 index. The Dow Jones Transport Index fell 3.6%.
The Federal Reserve brown paper also points out that transport and manufacturing enterprises face trade-related pressures.
"Trade concerns are so uncertain," said Stephen Carl, head of U.S. stock trading at Williams Capital Group. "This could have a huge negative impact, with costs coming from higher tariffs."
But sustained trade-related concerns are a key factor supporting the Fed's expectations for interest rate cuts later this month, said Ed Campbell, QMA portfolio manager and managing director. Expectations of interest rate cuts have pushed U.S. stock markets to record highs in the past week.
"One of the things Trump does on trade is that he uses trade as a weapon against the Fed," Campbell said. "The Fed says trade uncertainty is a reason the Fed is willing to cut interest rates."
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