After The Close
Wall Street pushed equity prices lower on Friday after a report indicated investments in China could be curtailed.
Stocks initially opened broadly higher on renewed optimism that high-level trade talks with China would resume next month, and perhaps achieve a meaningful accord.
At the same time, data released this morning showed that the economy’s recent trends generally remain in place. Specifically, the latest figures indicated that consumer spending is still on the rise, if at a slower pace in August, but business investment could be stronger. That is basically the framework that investors have been working from for much of this year.
The early advance was supported by strength in the financial sector, where Wells Fargo (WFC) announced the hiring of a respected industry veteran as CEO. Bank stocks have also benefited in recent weeks as bond yields have bounced off their August lows. The thinking is that lending margins will widen somewhat as a result.
Stocks turned mixed not long after the opening bell, though, as weakness in tech stocks developed following chip maker Micron Technology’s (MU) disappointing guidance for its fiscal quarter that ends in November.
That news did not support prospects for an industry recovery right away. Micron did suggest better times were ahead by mid-2020 as demand growth reduces inventories, but investors are taking a wait-and-see approach.
The market ticked higher again until shortly before the noon hour, when a report was released that suggested the White House was considering ways to limit investments in China. That news especially took a toll on the American Depositary Receipts of China-based companies, such as Alibaba (BABA).
As it turned out, the session’s tone turned to the downside for good after the report that there could be restrictions on investments in China. Even though that idea appears to be in the exploratory phase, it seems to dampen the potential for good feelings to come about in upcoming U.S.-China negotiations.
Elsewhere, the price of crude oil fell as the disruption caused by attacks on facilities nearly two weeks ago in Saudi Arabia appears to be contained. Quotations for a barrel of domestic oil fell about $0.50 a barrel, to around $55.90, in New York trading.
At the close, the Dow Jones Industrial Average was off 71 points; the NASDAQ fell 91 points; and the S&P 500 declined 16 points. Stocks also fell for a second straight week.
– Robert Mitkowski
At the time of this writing, the author did not have positions in any of the companies mentioned.
Before The Bell
But there was little selling conviction early in the day, and the move into the red was incremental. In all, after a half hour of trading, the Dow Jones Industrial Average was off just 35 points. In fact, equities would soon firm up, with the Dow and the S&P 500 both moving up towards the breakeven line for a spell, while the NASDAQ lagged. But this would prove a brief respite, and the market would soon fall anew, with the Dow dropping to a 50-point loss after the first hour, while the NASDSQ sold off by more than 40 points. It seemed as though it was all politics yesterday.
In other news on this penultimate trading day of the week, trade with China remained in the headlines, and the news was still rather constructive following the prior day's musings by the President that a trade deal could get put into place rather soon. Meantime, in economic news, the government released it second and last revision of second-quarter GDP growth, which again came in at 2.0%. That increase was down from the 3.1% tallied in the opening quarter of 2019. Downward revisions in personal spending and nonresidential fixed investment were offset by upward revisions in state and local government spending and exports.
As to the market, weakness persisted until the mid-afternoon, when buying returned and pushed the Dow and the S&P 500 Index momentarily into the green. Thereafter, though, there was a bit of renewed selling that sent stocks down again, but not near their lows for the session. In all, it was a combination of political fears coupled with some diminution in the prior day's trade hopes that led stocks into this mild retreat that would see the Dow give back 80 points, the S&P 500 fall by seven points, and the NASDAQ end off by 47 points. A fairly large loss was inked by the small-cap Russell 2000, as well.
