After The Close - Markets started the session with sizable losses, and failed to gain much traction as the morning wore on. Although stocks did show some life down the stretch, late afternoon selling dragged the major indexes to their lows for the day.
Not surprisingly, trade relations between the U.S. and China continued to be a major factor. Talks between the two nations are scheduled later in the week, however investors’ hopes of progress were dampened when the Trump Administration announced that it was blacklisting 28 Chinese corporations and organizations from importing U.S. technology due to alleged human rights violations. In the meantime, tariffs on $250 billion in Chinese goods are scheduled to increase to 30% (from 25%) on the 15th.
Comments from Kristalina Georgieva, the new head of the International Monetary Fund (IMF), didn’t help matters eithers. Ms. Georgieva said the global economy has entered a “synchronized slowdown”, and that the IMF is likely to cut its growth estimates for this year and next.
Elsewhere, the Bureau of Labor Statistics announced that the Producer Price Index (PPI) for September was down 0.3%. The 12-month increase fell to 1.4%, versus 1.8% through August, marking the smallest advance in nearly three years. On the plus side, the release supports the case for another interest rate cut from the Federal Reserve later this month.
At the closing bell, the 30-stock Dow Jones Industrial Average was down 313 points (1.2%), while the broader S&P 500 was off by 45 points. The NASDAQ fared the worst of the lot, shedding 132 points, or 1.7%. Performance across the 10 major market sectors was uniformly negative, with the biggest losses coming from technology (-1.8%), healthcare (-1.6%) and industrials (-1.5%). At the other end of the spectrum, telecommunications issues managed to limit losses to 0.6%. Meanwhile, oil prices also took a hit, with light sweet crude falling 0.8%, to around $52.30 a barrel. Ongoing trade tensions between the U.S. and China, and the potential for a slowdown in global economic growth weighed on market sentiment. Notably, the U.S. Energy Information Administration trimmed its outlook for global oil demand growth and 2020 price forecasts today.
Trading on the European bourses didn’t fare any better. While stocks across the Atlantic opened slightly to the upside, the potential global impact of the U.S./China trade standoff dragged prices down throughout the day. France’s CAC-40 and Germany’s DAX ended with losses just above 1%, while the U.K.’s FTSE 100 was down three-quarters of a percentage point. – Mario Ferro
At the time of this article's writing, the author did not have positions in any of the companies mentioned.
Before The Bell - The stock market, which rebounded nicely last Friday on a reassuring September employment report, which was strong enough to allay fears of an imminent recession and sufficiently subdued to likely encourage the Federal Reserve to again reduce interest rates when it meets later this month, began the new week in a much less upbeat manner, with an early loss in the Dow Jones Industrial Average of modestly more than 100 points. The other key indexes gave ground as well, but did not falter all that badly.
However, as has been the case so often this year, the bears did not really make a strong case and stocks quickly erased the deficit, even going positive for a spell around the noon hour in New York. To be sure, the Street was still upbeat about Fed policy prospects and the likelihood that the business expansion, now a decade old, can prove sufficiently resilient in the coming months. That said, there also is the matter of global trade, most prominently with China to consider. And here talks between the two parties are set to get under way.
And here is the sticking point, as the atmosphere between the deputy trade negotiators seem to be rather tense as the talks commence. At this time, neither side seems about to give way and bend in order to end the 15-month trade dispute between the world's two largest economic powers. Also hurting the market's early performance was a report that China's officials were increasingly reluctant to agree to a comprehensive trade deal, such as that proposed by the President, at this time.
Still, after being off much of the morning and then turning down again just after the noon hour, the stock market, underpinned by solid gains in some high-profile technology names, went more strongly positive as we moved into the middle of the afternoon. The gain in the Dow--more than 75 points as the 2:00 PM (EDT) hour rolled along-- was buttressed by a solid uptick in shares of Apple (AAPL – Free Apple Stock Report). Shares of Nvidia (NVDA) also moved higher after a brokerage house lifted its price target on the big chipmaker.
The mid-afternoon rally could not sustain itself, though, and just after 2:00 PM, prices began to turn downward, and did so in a hurry. In fact, within a half hour or so, the three large-cap indexes, the Dow, the S&P 500, and the NASDAQ all were in the minus column. They would stay there for the balance of the session, with no more than brief, half-hearted attempts to rally. The stock market, in fact, would falter just before the close, leaving the major indexes all fairly near their session lows. Worries about the trade negotiations were behind the late selling.
In sum, the Dow would ease by 96 points; the S&P 500 would descend 13 points; and the NASDAQ would finish lower by 26 points. Apple shares, once up smartly, moreover, gave back just about all of their gain, amid the late selloff.
Looking ahead to a new day, we see that shares in Asia were higher in overnight dealings; in Europe, the bourses are trending downward. Elsewhere, oil prices are little changed; Treasury note yields are easing a bit; and the U.S. equity futures are pointing to a lower opening. - Harvey S. Katz, CFA