For Markets, a Burst of Glee on Trade, Then the Facebook Flop

As far as market tremors go, you could do worse than the minutes before and after the close of Wednesday’s U.S. session.

A middling advance became a full-blown rally in stocks, with the S&P 500 Index closing up 0.9 percent gain. An exchange-traded fund tracking emerging markets tacked on half a percent in 30 minutes. Canadian equities extended gains, Mexico’s erased a loss, and yields on 10-year Treasuries jumped.

The reason for action was, as usual, trade. President Donald Trumpreached an agreement with European Commission President Jean-Claude Juncker aimed at averting a transatlantic tariff war. The U.S. and European will “hold off on other tariffs” while negotiations proceed, Juncker said.

But expecting things to stay as they are has been a losing bet in markets recently. Wednesday was no exception. Just minutes after the trade deal was announced, Facebook Inc. became the second member of the FAANG block todisappoint investors, reporting second-results that knocked the stock down 10 percent.

An ETF tied to the Nasdaq 100 slipped 1.9 percent from its 4 p.m. close, and some of the euphoria was pared in the S&P 500.

“It’s not that the news is not important — it is, but maybe there are a few things investors should still be concerned about,” wrote Matt Maley, equity strategist at Miller Tabak & Co. “A second FAANG stock reported poor earnings, and it gives investors a reason for caution.”

While celebrating the Europe agreement, others said it was not the most pressing issue on their trade agenda. That would be China, where the most recent development was the U.S. unveiling a list of $200 billion imports that could face higher duties. Chinese and U.S. officials have raised the prospect of resuming talks over trade between the two nations.

Wednesday’s news “is a sign that, hey, if someone has proposal, the U.S. will listen, which is very good,” Paul Christopher, head of global market strategy at Wells Fargo Investment Institute, said by phone. “It doesn’t mean that there are no more questions. There are a lot of big questions out there, like Nafta and China. If President Xi and President Trump were having the same understanding, that would be a much bigger development.”

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