After The Close - The major U.S. indexes started the last trading session of the week with a slight uptick, but the bears quickly regained control and the selling generally accelerated as the day wore on.
On the economic front, the U.S. monthly employment report for November showed that 155,000 jobs were created, while the unemployment rate remained unchanged at a 49-year low of 3.7%. However, the number of new jobs came in shy of expectations, and about 50,000 below the average over the past 11 months. On the plus side, slowing growth may prompt the Federal Reserve to ease back on planned rate hikes, which would generally be viewed as being good news for stocks. However, that was not the case today, as concerns over trade relations between the U.S. and China remained at the fore. Things took a decided turn for the worse yesterday, after the U.S. requested the arrest of a top executive from one of China’s leading technology companies citing a violation of sanctions on Iran. Today, two administration officials made opposing remarks regarding the progress of negotiations, leading to a further erosion of confidence that the ongoing tariff dispute was any closer to being resolved.
At the closing bell, the Dow 30 was down 559 points, or 2.2%, the S&P 500 was off by 63 (2.3%), and the tech-heavy NASDAQ fared the worst of the lot, tumbling 219 points (3.1%). The downturn was widespread, with declining issues outnumbering advancers by more than two-to-one. Most of the 10 major market sectors were firmly in the red, with the largest losses coming from technology (down 3.0%), consumer cyclicals (2.7%), and healthcare (2.3%). Utilities were the only group to finish on the positive side of the ledger, rising about one-third of a percent. Altogether, this marked the end of a difficult week for stocks, with declines in the key indexes ranging between 3.7% and 4.2%.
Elsewhere, oil prices showed some renewed life, with light sweet crude rising 2% to around $52.55 a barrel. The move came after OPEC and its allies announced that they had agreed to cut oil output by 1.2 million barrels a day. However, the commodity was still down nearly 15% over the past month. Part of this reflects increased output from the U.S., which recently surpassed Saudi Arabia as the largest oil producer.
Trading on the European bourses was largely more upbeat, with Britain’s FTSE 100 advancing 1.1% while France’s CAC-40 tacked on about three-quarters of a percentage point. Germany’s DAX, however, failed to break through into positive territory closing just below the unchanged mark. – Mario Ferro
At the time of this article's writing, the author did not have positions in any of the companies mentioned.
1:00 PM EDT - After a mixed to higher opening on Wall Street this morning, stocks have dropped back sharply, adding more anxiety to a week that already had unnerved even the most intrepid of investors.
On point, the market climbed slightly in the first few minutes of trading today on apparent relief that a weaker-than-expected jobs report would cause the Federal Reserve to become slightly less aggressive in its monetary approach.
However, after the first half hour of trading, the market started to head south, and the selling has picked up steam heading into the lunch hour.
This changing outlook reflects a possible belief that the Fed might proceed more slowly in raising rates next year, but at the same time the data caused some to speculate that economic growth, and hence profit improvement, might be more restrained.
In any event, as we near the 1:00 PM (EST) hour in New York, we see that the Dow Jones Industrial Average is off 450 points; the S&P 500 Index is lower by 50 points; and the tech-driven NASDAQ is now in the red to the tune of 140 points. - Harvey S. Katz, CFA
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Before The Bell - The U.S. stock market, up strongly on Monday, down even more significantly on Tuesday, and then closed on Wednesday for the funeral of former President George H.W. Bush, opened the session yesterday morning solidly to the downside. In all, after losses in the overnight hours in Asia and a downturn in early trading in Europe, the Dow Jones Industrial Average tumbled by 500 points at the open. Steep losses also were suffered by the S&P 500 Index and the tech-laden NASDAQ. The equity market was following up on the selling that took place on Tuesday, which was generated by concerns about trade and the direction of the U.S. economy.
Then, the market tried to rebound in the next few minutes, but, initially, at least, to no avail, and the averages would fall back down to and then through their earlier lows before attempting once more to pare those deficits. All of that was within the first half hour of trading. Once more, just about the only green arrows that could be found was on the VIX Volatility Index, which was up 15% on those volatility jitters. Losses were apparent in all sectors at that juncture, with some high-profile tech names being really hit hard once again. Still, the earlier lows were holding as we passed the first hour of trading.
Wall Street, it would seem, has been unnerved by several things. First, there are the trade headwinds, which, for the moment, at least, are a bit less intense. Also, notwithstanding the temporary truce brokered between the United States and China, there are no assurances that a permanent accord can be reached. Finally, there are economic slowdowns in Europe and in parts of Asia, along with fears such downticks could spread here, with all their ramifications. The stateside growth concerns are getting support from an inverted yields curve, in which longer-dated debt issuances are sporting prices higher than those of lesser durations.
The worry is that such an inversion may be a harbinger of harsher economic times at home, as has often been the case in the past. As to the economic indicators, most, including releases on manufacturing and non-manufacturing, are signaling continued steady GDP growth. Still, the concerns persist and the market, awaiting this morning’s November employment report, was understandably on edge (see below). Then, after holding with around a 500-point Dow loss, the sellers gathered again and that composite tumbled to a near 800-point deficit shortly before noon on the East Coast.
That would be the low point of the day, and from there, stocks tried to rally somewhat, and did see some success in that endeavor, even though oil prices fell sharply again, tumbling nearly 3%. The market did move toward the breakeven level as the day wound down, albeit staying largely in the red throughout, as fears over U.S-China trade relations, concerns about a global slowdown, and worries regarding weak data at home and the upcoming Federal Reserve meeting weighed on sentiment. Meantime, trade fears ratcheted up after China-based Huawei's CFO was arrested. Huawei is a large mobile phone maker.
These concerns aside, the market did make one more push to erase its losses late in the session. And it almost did so, after a news report surfaced suggested that the central bank is considering whether to signal a wait-and-see approach in interest rates at its upcoming FOMC meeting this month. The news on rates would allow the Dow to shed all of its massive daily loss save for 79 points, while the S&P 500 and S&P 400 would also almost come back all the way, while the NASDAQ would gain 30 points, as tech stocks recovered nicely. All of this allowed the equity market to largely enter this data-driven morning in reasonable shape.
As to the session ahead, after some gains in Asia overnight and a stronger session so far in Europe this morning, we see that yields on the 10-year Treasury note, which ended matters at 2.88% yesterday, are now at 2.91%. As to the employment report we alluded to above, the Labor Department indicated that non-farm payrolls rose by 155,000 positions in November; a rise of 200,000 jobs had been the expectation. Further, the jobless rate, already at a 50-year low of 3.7% in both September and October, held steady last month.
In other details of the survey, average hourly wages gained $0.06 last month, and are up by 3.1% for the past 12 months, while the labor-force participation rate came in at 62.9%, which represented no change from the month before. Taken as a whole, this was a fairly weak report, but one that should give investors some confidence going forward that the Fed will not press ahead aggressively on the monetary front. Not surprisingly, the U.S. equity futures, off sharply before the report, managed to erase their losses, and are now suggesting a mixed opening when trading resumes in a few minutes. - Harvey S. Katz, CFA