Wall Street closed sharply lower on the first day of the last month of the year on trade jitters and weak U.S. economic data. Uncertainty about an interim trade deal with China and renewed tariff war with Latin American and European countries pushed all three major stock indexes in the negative territory.
The Dow Jones Industrial Average (DJI) plunged 268.37 points or 0.9% to close at 27,783.04. The S&P 500 plummeted 0.8% to close at 3,113.87. Meanwhile, the Nasdaq Composite Index closed at 8,567.99, shedding 1%. The fear-gauge CBOE Volatility Index (VIX) jumped 18.2% to close at 14.92. A total of 3.84 billion shares were traded Monday, in line with the last 20-session average. Decliners outnumbered advancers on the NYSE by 2.66-to-1 ratio. On Nasdaq, a 2.48-to-1 ratio favored declining issues.
How Did The Benchmarks Perform?
The Dow closed in negative territory with 24 components of the 30-stock blue-chip index closing in the red while 6 ended in green. The biggest loser of the Dow is The Boeing Co. BA which lost 3%. The Boeing carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The tech-laden Nasdaq Composite ended in the negative territory due to poor performance of large-cap tech stocks. The S&P 500 also finished in the red. The Real Estate Select Sector SPDR (XLRE), the Industrials Select Sector SPDR (XLI) and the Technology Select Sector SPDR (XLK) lost 1.8%, 1.7% and 1.4%, respectively. Notably, nine out of total11 sectors of the benchmark index closed in the red.
No Abatement in U.S.-China Trade Conflict
Investors are keenly watching trade-related developments as the Dec 15 deadline is approaching. President Trump set this deadline for signing phase-one deal otherwise his government will implement a fresh round of 15% tariffs on $160 billion of Chinese goods mostly used a inputs for consumer goods. Moreover, on Dec 2, U.S. Commerce Secretary Wilbur Ross said that U.S. government may also hike tariff rate on $250 billion of Chinese goods, which are already under 25% tax bracket.
Meanwhile, diplomatic relation between the two largest trading nations deteriorated on Nov 27 after President Trump signed two bills supporting the Hong Kong protesters, despite China’s repeated objections. Several industry watchers have said that a partial trade deal if signed at all will not materialized before late December or may be in the next year.
More Tariff War
On Dec 2, President Trump said that he will restore on U.S. steel and aluminum imports from Brazil and Argentina effective immediately. The U.S. government implemented 25% tariff on imported steel and 10% duty on imported aluminum on Mar 1, 2018.
According to Trump, “Brazil and Argentina have been presiding over a massive devaluation of their currencies, which is not good for our farmers.” Trump also insisted the Fed to prevent countries from gaining an economic advantage by devaluing their currencies.
The U.S. government has also decided to impose retaliatory tariffs on France since the later has imposed digital tax, which the Trump administration believes will hurt business interest of U.S. tech behemoths. The U.S. government has proposed levying duties of up to 100% on $2.4 billion French products, including sparkling wine, cheese, and other goods.
Weak U.S. Economic Data
The Institute of Supply Management (ISM) reported that its Manufacturing PMI for the month of November came in at 48.1, lagging both previous month’s index and the consensus estimate of 48.3 and 49.3, respectively. Notably, any reading below 50 indicates contraction in U.S. manufacturing activities. November marked the fourth successive months of manufacturing contraction.
However, IHS Markit reported that its manufacturing PMI for the month of November came in at 52.6 compared with 51.3 in October. Any reading above 50 indicates expansion of the U.S. manufacturing sector.
Meanwhile, construction spending for the month of October declined 0.8% compared with a drop of 0.3 in September. The consensus estimate was for a gain of 0.4% in October.
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