U.S. Stocks Decline Amid Trade Woes
August 12 2019 - 3:54PM
Dow Jones News
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.
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.
Growing uncertainty has contributed to the markets' volatile
streak in recent weeks. At one point midafternoon, selling pressure
unexpectedly picked up, dragging the Dow Jones Industrial Average
down as many as 462 points before it pared losses. Analysts said
there were no obvious catalysts for the move.
The Dow industrials were recently down 402 points, or 1.5%, to
25884. The S&P 500 declined 1.3%, and the Nasdaq Composite fell
1.4%.
Few believe the U.S. is headed toward an imminent downturn just
yet. But many 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 2% and
Advanced Micro Devices losing 5.2%. 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 down 2.4% and 4.8%,
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 15:39 ET (19:39 GMT)
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