Business Corpus: Dow Jones Whipsawed As China Trade War, Trump Impeachment Fears RiseFears of a China trade war and rising odds that President Trump will face impeachment took the focus off interest rates on Wall Street Thursday. The post Dow Jones Whipsawed As China Trade War, Trump Impeachment Fears Rise appeared first on Investor's Business Daily.

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Wall Street got a break from Fed rate-hike worries on Thursday for a change. But the Dow Jones industrial average couldn't catch a break amid a new outbreak of concern about a China trade war and a growing sense that a messy impeachment fight for President Trump could be in the cards.

The Dow Jones industrial average, S&P 500 and Nasdaq composite all fell sharply in morning trade on Thursday, before staging an afternoon recovery. The Dow Jones roared back from down nearly 400 points to close with a whisper-thin gain. The S&P 500 index rebounded from below its 200-day moving average to end with modest losses. Meanwhile, the safety bid sent gold prices higher and Treasury yields lower.

Treasury Secretary Steven Mnuchin, arriving in Beijing with a team of negotiators, was greeted by news that China has stopped buying soybeans from U.S. producers.

China warned last month that it will retaliate against U.S. farmers if President Trump makes good on his threat to impose 25% tariffs on $50 billion worth of mostly high-tech Chinese imports.

But Trump's decision on whether to follow through on that threat isn't due until next month. The takeaway is that China looks unlikely to yield to U.S. threats and thinks it can take advantage of Trump's political vulnerabilities.

Trump Impeachment At Least 50% Odds

Meanwhile, Horizon Investments strategist Greg Valliere, who has long tracked political developments for Wall Street, wrote Thursday that he now sees at least 50% odds that Trump will face House impeachment in early 2019. Odds of removal from office are still low, but rising, he wrote.

Valliere said he changed his assessment after several recent developments: The leaked questions that Special Counsel Robert Mueller wants to ask Trump include many about Trump campaign dealings with Russia. Trump just dismissed his top attorney, Ty Cobb, who wanted his client to cooperate with the Mueller probe. And now Rudy Giuliani, who has joined the Trump legal team, said that Trump repaid Michael Cohen for the $130,000 hush-money payment to Stormy Daniels just before the election.

Unlike the Clinton impeachment, the stock market would seem to have a big stake in a potential Trump impeachment. Not least, the 21% corporate tax rate could be low-hanging fruit for a future Democratic president with new spending priorities to fund.

China Presses Trump On Trade

Valliere thinks the stock market can surmount impeachment fears, but he adds that trade war and Fed rate-hike concerns make for a pretty serious wall of worry.

Shares of U.S. agribusiness Bunge (BG) fell 3.5% after Bloomberg reported comments from the company's CEO saying that China has shifted soybean purchases to Canada and Brazil, at least temporarily.

Trump has taken a softer tack toward China in recent weeks. Late Wednesday, he tweeted about his good relationship with Chinese President Xi Jinping while noting negotiations to create "a level playing field on trade." A few weeks earlier, Trump tweeted that he was "very thankful" for Xi's speech offering concessions on trade, even as China said nothing new was offered.

Given the tone set by Trump and his political interest in avoiding tit-for-tat tariffs that undermine his support in the Midwest, a full-fledged trade war with China continues to look unlikely. However, a cold war over trade could happen and isn't without risk for investors.

Just as U.S. soybean purchases were halted without announcement or the imposition of tariffs, China could quietly target companies like Dow Jones components Boeing (BA) or Caterpillar (CAT). A cold war may already be on in advanced technology sectors. After the U.S. blocked Broadcom (AVGO) from buying Qualcomm (QCOM) because of its ties to Chinese telecom firms, China retaliated by delaying Qualcomm's acquisition of NXP Semiconductors (NXPI).