After The Close
After taking a beating on Monday, stocks started today’s session slightly to the upside. However, the move was short-lived as trading soon became choppy, and the major U.S. indexes then succumbed to a modest afternoon selloff.
Reports that the U.S. and China were moving along with talks appeared to spark some hope that trade issues between the economic superpowers might finally ease. But that was not enough to offset the negative sentiment that has pervaded the markets of late, as falling oil prices began to raise concerns over a potential slowdown in global growth. The Dow had the toughest go of it today. Wavering above and below the unchanged mark several times, the Industrials shed 100 points, while the broader S&P 500 was down by four. Meanwhile, the NASDAQ fared the best of the lot, spending most of the session in positive territory. The tech-heavy composite ended unchanged.
Notable movers today included General Electric (GE), whose shares jumped after the besieged conglomerate announced plans to sell as much as 20% of its majority holding in oil services company Baker Hughes (BHGE). The move should generate about $4 billion in cash for the struggling company.
Among the 10 major market sectors, advancers edged out decliners, led by telecommunications (up 0.8%), financials (+0.5%), and technology (+0.5%). Energy stocks fared the worst, shedding 2.7%. Relatedly, oil prices took a big hit, with light sweet crude trading down 8.3%, to just under $55 a barrel. This marked a decline of more than 23% over the past month, sending the commodity back into bear market territory. The recent decline in oil prices reflects rising global production along with the U.S. granting some exceptions to its recently imposed sanctions on Iran.
Moving over to the European bourses, today’s session was mostly upbeat. Germany’s DAX came out in front with a solid gain of 1.3%, while France’s CAC-40 wasn’t far behind with an increase of just under one percent. Meanwhile, the U.K.’s FTSE 100 ended the session at just above breakeven.
– 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
Looked at individually, the problems with Apple--and concerns about demand for its iPhones--have been in place for weeks now, and the stock, which earlier this year had traded above $233, fell below $200 yesterday morning. The selloff in that equity also weighed heavily on the entire tech group, with that sector off by nearly 3% in midday trading yesterday. However, Apple wasn't the only bone of contention; there also were trade worries, as we ready ourselves for the next round of discussions with China.
Finally, there is the Federal Reserve. The central bank met last week, and its FOMC adjourned without increasing interest rates. But it did suggest that additional rate hikes were coming--with the next one most likely being voted for at the mid-December FOMC get-together. Expectations are that two-to-three such increases are on the menu for 2019. These worries more than offset some optimism early in the day after proposed merger deals had been announced. Meantime, the selling intensified as the afternoon began
In all, as traders returned from lunch, they found the Dow off by some 500 points for a time, while the NASDAQ, as noted, was an even bigger loser on a percentage basis, falling by more than 200 points at its mid-session nadir. In our view, there was also some concern about the changing political landscape in the wake of last week's mid-term elections. In any event, the selloff continued as the afternoon progressed, with occasional buying breaking the downtrend, but not on a sustained basis. As we entered the final two hours of trading the Dow was off 430 points.
The selling would continue into the latter reaches of the afternoon, with the tech group leading the way lower. In truth, though, it was a case of the dollar strengthening, which will hurt our trade position, and mounting concerns about future earnings. All told, the market would continue to sell off as the session wound down, with the Dow falling through the 400-point area, then to 500 points, and finally in the last few minutes to a deficit of more than 600 points. The NASDAQ, meantime, would fall by more than 200 points, a decline of about 3%.
As the day concluded, the final tallies made rather upsetting reading for those long equities. Specifically, the Dow Industrials tumbled 602 points; the S&P 500 Index shed 55 points, which also was in the range of 2%; and the NASDAQ plunged 206 points. In the small-cap area, the Russell 2000 lost 31 points, or also 2%. Also losing ground was crude oil, which declined for the eleventh consecutive session, which was a record. Electric utility stocks that were affected by the California wildfires, also fell back aggressively. It was a difficult day all around.
Looking out at a new day now and following the big selloff in New York, we see that stocks were mixed in Asia overnight, while in Europe, the leading bourses are pressing higher thus far this morning. In other markets, oil prices down for 11 days in a row, now are moving lower still, while Treasury note yields, which fell modestly in trading yesterday, are now edging downward once more. Finally, our equity futures are poised for an early rise in trading this morning, boosted by good results from The Home Depot (HD – Free Home Depot Stock Report) and hopes for new trade talks with China. Finally, given yesterday's fireworks, we sense the day ahead will be volatile as well. Stay tuned.
