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Trade Worries Send Stocks Lower 05/23 16:01
Heightened worries that the U.S. and China are headed for a long standoff in
their costly trade dispute put investors in a selling mood Thursday.
(AP) -- Heightened worries that the U.S. and China are headed for a long
standoff in their costly trade dispute put investors in a selling mood Thursday.
Stocks ended sharply lower on Wall Street in a broad sell-off that left the
benchmark S&P 500 index on track for its third straight weekly loss and had the
Dow Jones Industrial Average down more than 400 points until late afternoon.
Traders sought safety in the bond market, driving bond prices higher, which
pulled the yield on the 10-year Treasury to 2.31%, the lowest level in more
than a year.
The stock market has been highly volatile since Washington and Beijing
escalated their dispute over trade earlier this month. Now, the two sides have
broken off negotiations and appear set for a long standoff. Investors are
concerned that a prolonged trade war could stunt economic growth and hurt
corporate profits.
"Markets are appreciating how far apart the two sides are and how messy the
grand deal would be that both sides had led us to believe was coming very
quickly," said Sameer Samana, senior global market strategist at Wells Fargo
Investment Institute.
The S&P 500 index fell 34.03 points, or 1.2%, to 2,822.24. The index was
down 2.5% before the selling eased. The Dow lost 286.14 points, or 1.14%, to
25,490.47. At its lowest, the Dow slid 448 points.
The Nasdaq composite dropped 122.56 points, or 1.6%, to 7,628.28. The
Russell 200 index of small company stocks gave up 30.25 points, or 2%, to
1,501.38.
Markets in Asia and Europe also saw steep losses.
The U.S. and China concluded their 11th round of trade talks earlier this
month with no agreement. Instead, the U.S. moved to increase tariffs on Chinese
goods, prompting China to reciprocate. The trade dispute escalated further
after the U.S. proposed restrictions on technology sales to China, though it
has temporarily backed off.
China is looking for ways to retaliate and has reached out for support from
Russia and its neighbors in Asia. Both the U.S. and China have made overtures
about continuing trade talks, but none are scheduled. That uncertainty has many
traders nervous about how and when the trade dispute will be resolved.
"Now people are realizing how weighty the issue is and how many different
aspects of it are just so intractable, where it's going to be difficult for the
Chinese side to give in and it's going to be hard for the U.S. not to ask for
some of these changes," Samana said.
The resumption of trade hostilities this month has interrupted a market
rally that saw the S&P 500 wipe out the fourth quarter's sharp decline and hit
a new record. The index is down 4.2% so far in May, though it's still sporting
a gain of 12.6% for the year.
Trade-sensitive technology stocks led the market slide Thursday. Many tech
companies do significant business in China, and the Trump administration's
proposed restrictions on technology sales to Chinese companies hit their stocks
hard.
Apple fell 1.7%, while chipmakers such as Advanced Micro Devices, Broadcom
and Nvidia each dropped by at least 3%. An S&P index that tracks the chip
industry's performance has plunged about 15.2% so far this month amid the
heightened trade tensions.
Banks also took heavy losses in the sell-off as bond yields fell sharply.
Lower yields mean lower interest rates on loans, which makes lending less
profitable. JPMorgan dropped 2% and Bank of America slid 2.6%.
Exxon Mobil fell 2.3% and Chevron gave up 2.2%, part of a broad slump in
energy sector stocks as the price of U.S. fell sharply. Benchmark U.S. crude
plunged 5.7% to settle at $57.91 a barrel. It's down 7.8% for the week. Brent
crude, the international standard, closed 4.5% lower at $67.76 per barrel.
Investors sent shares in utilities and real estate companies higher. Those
sectors are considered less risky, which makes them more attractive when
traders are concerned about volatility and a slowdown in economic growth.
Eversource Energy and SBA Communications, which owns wireless communication
towers, each gained 1.5%.
Thursday wasn't all about selling on Wall Street.
Traders bid shares in L Brands 12.8% higher after the owner of the
Victoria's Secret and Bath & Body Works chains blew away Wall Street's first
quarter earnings forecasts.
Avon shares rose 3.2% after Brazilian cosmetics maker Natura announced that
it is buying the beauty products company for $3.7 billion in stock. The deal
would create the world's fourth-largest group of beauty products. Natura also
currently owns retail stores like The Body Shop.
In other commodities trading Thursday, wholesale gasoline slid 3.9% to $1.91
per gallon. Heating oil lost 4.2% to $1.96 per gallon. Natural gas rose 1.4% to
$2.58 per 1,000 cubic feet.
Gold climbed 0.9% to $1,285.40 per ounce, silver jumped 1.1% to $14.61 per
ounce and copper added 0.1% to $2.68 per pound.
The dollar fell to 109.49 Japanese yen from 110.29 yen on Wednesday. The
euro strengthened to $1.1183 from $1.1160.
(BAS)
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