Wall St. flat as U.S.-China trade deal optimism fades

(Reuters) – U.S. stocks halted a three-day winning streak on Monday, as oil prices dived 2% and rising doubts over how quickly a partial U.S.-China trade deal announced on Friday could be sealed.

Energy majors such as Exxon Mobil Corp (XOM.N) and Chevron Corp (CVX.N) were the biggest drags on the S&P 500 index, as oil prices gave up last week’s gains following caution around the trade deal. [O/R]

The S&P 500 and Dow Jones indexes had ended Friday with their first weekly gain in a month after Washington signaled the two sides had taken a major step in easing the tit-for-tat measures that have hammered global growth this year.

Trump, however, acknowledged the agreement could still collapse and a handful of media reports and comments from Treasury Secretary Steven Mnuchin left investors feeling less upbeat about what had really been achieved.

Mnuchin said in a CNBC interview that he had “every expectation” that if a U.S.-China trade deal was not in place by Dec. 15, additional tariffs would be imposed, although he said he expected a deal to be agreed by then.

Shares of companies with a sizeable exposure to China, including Nvidia Corp (NVDA.O), Advanced Micro Devices Inc (AMD.O) and Micron Technology Inc (MU.O), slipped slightly in early trading after gaining on Friday. The Philadelphia Semiconductor index .SOX was off 0.3%.

“It’s more of the fact that it was a handshake deal,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.

“On Friday, we closed off the highs of the day as investors began to realize that while on the surface this is good news, there’s no substance to the deal just yet.”

At 10:00 a.m. ET, the Dow Jones Industrial Average .DJI was up 6.03 points, or 0.02%, at 26,822.62, while the S&P 500 .SPX was down 2.35 points, or 0.08%, at 2,967.92. The Nasdaq Composite .IXIC was down 7.78 points, or 0.10%, at 8,049.26.

Investors will now be looking at third-quarter earnings to gauge the impact of the trade conflict and a sluggish domestic economy on corporate America.

The reporting season kicks off on Tuesday, with the biggest U.S. banks expected to report a 1.2% decline in earnings due to falling interest rates, a raft of unsuccessful stock market flotation and trade tensions.

Citigroup Inc (C.N), Goldman Sachs Group Inc (GS.N) and Wells Fargo & Co (WFC.N) were down between 0.1% and 0.4%. The S&P 500 bank index .SPXBK had logged its best day in a month on Friday.

Overall, analysts are forecasting a 3.2% decline in profit for S&P 500 companies for the quarter from a year earlier, based on IBES data from Refinitiv.

Fastenal Co (FAST.O) was down 1% after two brokerages downgraded the stock. The company had logged its best day in three decades on Friday after reporting strong results.

Nike Inc (NKE.N) was the top gainer on the Dow Jones index after Bank of America Merrill Lynch upgraded the stock to “neutral” from “underperform”.

Shares of U.S. construction and engineering company AECOM (ACM.N) rose 5.6% after it agreed to sell its management services unit to private equity firms for about $2.4 billion.

Declining issues outnumbered advancers for a 2.08-to-1 ratio on the NYSE and for a 2.07-to-1 ratio on the Nasdaq.

The S&P index recorded one new 52-week highs and two new lows, while the Nasdaq recorded nine new highs and 51 new lows.