USA stocks plummet on concerns over growth, earnings prospects

Jeannie Matthews
May 16, 2019

The S&P 500 and the Dow recorded their largest percentage drops since January 3 on Monday in one of Wall Street's worst sell-offs this year after China hit back with tariffs on $60bn of U.S. goods.

Technology stocks led the way lower, with digital storage companies and chipmakers among the big decliners. Farming equipment maker Deere drove losses in the industrial sector.

Figures showing the USA economy grew faster than expected in the first quarter and that the unemployment rate fell to a almost five-decade low in April have also renewed faith that the almost 10-year-old expansion can continue, investors say. "This China trade agreement issue is changing investing into something more like speculating because no one knows what direction this thing can go".

Indeed, Beijing has said top trade envoys, including Vice Premier Liu He, will head to Washington on Thursday to resume negotiations.

The Dow Jones Industrial Average sank more than 2% on Monday. Meanwhile, the Dow is down more than 4%.

More importantly, from a price perspective the downtrend that had been formed since prices started pulling back from the peak on the likes of the comprehensive S&P 500 index, as shown in the chart below, still remains intact. The benchmark index is coming off its worst week since January, though it's still up sharply for the year. USA stocks are poised to open higher on Tuesday.

Technology stocks were bearing the heaviest losses. The stocks of Apple Inc. slumped 5.8 percent and chipmaker NVIDIA fell 6.1 percent.

The All Ordinaries was down 43.7 points, or 0.69 per cent, to 6,370.9.

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Safe-play holdings were the only winners as traders sought to reduce their exposure to risk.

Prices for U.S. exports rose 0.2 per cent in April after a 0.6-per cent rise in March, the department said.

Mr. Higgins cited the previous inversion last month, when the three-month Treasury yield topped that of the 10-year, spooking markets.

Overseas markets also fell.

The MSCI Asia Pacific Index advanced 0.5%, the biggest gain in six weeks. Natural gas inched 0.1% higher to $2.62 per 1,000 cubic feet. The offshore yuan - a key risk indicator due to concern China will use it to retaliate against USA tariffs - stabilized after a six-day decline.

Monday was a very bad day for Wall Street, after news that China will hit with counter-tariffs on $60 billion worth of US imports, from June 1. He also said companies would be forced to leave the country without an agreement, adding that China had a "great deal" nearly completed but they "backed out". Europe was prepared to retaliate with a series of import fees on USA goods if Trump made good on the auto tariff threat. "Sentiment is also better as President Trump seems to be desiring a compromise", said Kota Hirayama, senior emerging markets economist at SMBC Nikko Securities in Tokyo. Many are still confident that both sides will eventually reach a deal.

Ride-sharing company Uber tumbled another 10.8% on its first full day of trading following its rocky debut on the stock market Friday.

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