Stock market volatility driven by trade truce uncertainty: TD Ameritrade CEO

TD Ameritrade CEO Tim Hockey told FOX Business that growing trade confusion between China and the United States is driving Wall Street’s fear index to its highest level in six months.

“The reason why we are seeing so much up and down activity, notably around the trade files, is because it can go from, 'hey everything is all clear,' to the next instant a tweet comes and maybe it’s not clear,” he said on Tuesday.

Stocks nosedived earlier in the trading day after President Trump warned China on Twitter that he is “Tariff Man,” suggesting the administration will slap tougher tariffs if talks with Beijing fail.

“President Xi and I want this deal to happen, and it probably will. But if not remember, I am a Tariff Man,” Trump tweeted.

The Dow Jones Industrial Average tanked 799 points to 25,027, or 3.1 percent, as the bond market signaled to investors an economic slowdown. The S&P 500 and Nasdaq Composite also ended lower by more than 3 percent.

Although global trade is a vital issue affecting the U.S. economy, Hockey said the intraday volatility is based on a shift in mood that’s far less important than the absolute direction of long-term interest rates.

“The Fed decision in the long term is way [more] important to the fundamental drivers of the economy,” he said.

Last week, Fed Chair Jerome Powell said the central bank's benchmark interest rate is "just below" neutral as it tries to carefully strike a balance between raising interest rates too quickly or too slowly.

Despite a record-low unemployment rate, the economy is challenged with a stagnant housing market, a slowdown in GDP and trade concerns with China.

“The question for the economy in the future is, how much further can [the unemployment rate] go?” Hockey said, adding that that a worker shortage adds to wage pressures, driving interest rates to counter inflation.

The U.S. markets are closed Wednesday to commerate a national day of mourning honoring former President George H.W. Bush ahead of his state funeral in Washington, designated by President Trump.