TLW Tullow Oil Plc

By Avantika Chilkoti and Akane Otani 

U.S. stocks fell Monday as a wave of selling that analysts attributed to mounting doubts about a trade deal pulled lower everything from bank stocks to shares of technology companies.

The Dow Jones Industrial Average lost 434 points, or 1.7%, to 25853, with the selling pressure picking up mid-afternoon. The S&P 500 declined 1.5%, and the Nasdaq Composite fell 1.5%.

Worries about the path of U.S.-China trade negotiations and the global economy have kept stocks and bond yields under pressure for much of the month. Goldman Sachs analysts said Monday that the outlook for trade talks had "collapsed," adding that they believe Washington and Beijing won't reach an agreement before the 2020 elections.

Few analysts believe the U.S. is headed toward an imminent downturn.

"Given the low unemployment and strong consumer confidence in the U.S., it's unlikely we get a recession any time soon," said Patrick Spencer, managing director at U.S. investment firm Baird.

However, others worry that the gloomy outlook reflected in bond markets -- where yields across the globe have dropped in recent months -- could soon be reflected in stocks too.

"If [yields] keep edging down, the equity market is clearly wrong because the bond market will be telling you we have one mother of a recession coming," said Neil Dwane, global strategist at Allianz Global Investors.

Bank stocks took a fresh hit Monday as U.S. Treasury yields retreated again, with Citigroup, Bank of America and Morgan Stanley each losing more than 2%. Declining bond yields tend to weigh on banks by cutting into their lending profits.

Semiconductor firms also lost ground, with Nvidia down 1.4% and Advanced Micro Devices losing 2.5%. Much of the group has pulled back in recent weeks as investors have grown more pessimistic about the prospects of a U.S.-China trade agreement.

Other proxies for investors' trade optimism also slipped Monday, with Caterpillar and farm machinery maker Deere & Co. down 2.2% and 4%, respectively.

Elsewhere, the Stoxx Europe 600 edged down 0.3%, weighed down by declines among lenders and travel and leisure stocks.

Among the biggest gainers in the region was Tullow Oil, whose shares rose 20% after the company said it had found more oil off the coast of Guyana.

Hong Kong's Hang Seng Index fell 0.4% after protests at the city's airport prompted authorities to cancel more than 100 flights. Chinese authorities said the violent weekend demonstrations marked the emergence of " the first signs of terrorism" in the semiautonomous city -- and vowed a merciless crackdown.

"Hong Kong is clearly an important bellwether for just how far China is willing to exert its influence," said Matthew Cairns, a senior rates strategist at Rabobank.

"This is a clear show of Chinese strength and I don't think, just as we are seeing in the trade war, that China will be willing to allow overt breaches of its authority within the region and that clearly is having pretty negative effect in terms of the Hang Seng," he added.

The Shanghai Composite closed higher, though, notching a 1.5% gain after China's central bank continued to weaken the yuan, though at a slower pace than traders had expected. That helped ease concerns of a sharp devaluation after President Trump last week accused China of manipulating its currency.

--William Horner, Steven Russolillo and Frances Yoon contributed to this article.

Write to Avantika Chilkoti at Avantika.Chilkoti@wsj.com and Akane Otani at akane.otani@wsj.com

(END) Dow Jones Newswires

August 12, 2019 15:03 ET (19:03 GMT)

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