Stocks end week on sour note amid trade concerns
27-Sep-19 16:20 ET
Dow -70.87 at 26820.25, Nasdaq -91.03 at 7939.63, S&P -15.83 at 2961.83
briefing.com
[BRIEFING.COM] U.S. stocks ended the week on a sour note following news that the White House is considering restricting U.S. investment in China. The ensuing weakness in technology stocks weighed heavily on the Nasdaq Composite (-1.1%), but stocks did close off session lows, leaving the S&P 500 (-0.5%) and Dow Jones Industrial Average (-0.3%) with modest losses. The Russell 2000 lost 0.8%.
According to Bloomberg, there have been talks to limit U.S. investors' portfolio flows to China and delist Chinese companies from U.S. stock exchanges. The news erased an early 0.3% gain in the S&P 500, which then fell as much as 1.1% amid a host of concerns, which included a re-escalation of tensions, possible Chinese retaliation, and trade talks on Oct. 10-11 not going as planned.
Nine of the 11 S&P 500 sectors finished in the red, led lower by the trade-sensitive, and heavily-weighted, information technology sector (-1.3%). Semiconductor stocks like Micron (MU 43.21, -5.39, -11.1%) were especially weak, as well as Chinese stocks listed in the U.S. -- Alibaba (BABA 165.98, -9.02, -5.2%), JD.com (JD 27.82, -1.76, -6.0%), and Baidu (BIDU 101.21, -3.86, -3.7%).
To be fair, Micron was already down big prior to the news, as investors reacted negatively to its soft gross margin guidance and a record inventory level. Micron suppliers Lam Research (LRCX 230.08, -12.75, -5.3%) and Applied Materials (AMAT 49.43, -2.72, -5.2%) underperformed. The Philadelphia Semiconductor Index dropped 2.4%.
The S&P 500 briefly fell below its 50-day moving average (2949), but buyers quickly stepped in to bring the benchmark index back above the key technical level. Relative strength in S&P 500 financials sector (+0.2%) supported the rebound attempt, while the energy sector (unch) returned to its unchanged mark.
Wells Fargo (WFC 50.71, +1.84, +3.8%) led the financials sector in gains after it announced Charles W. Scharf will be its next CEO, effective Oct. 21. Mr. Scharf was previously the CEO of BNY Mellon (BK 44.53, -2.10, -4.5%) and held executive positions at JPMorgan Chase, Citigroup, and Salomon Smith Barney prior to BNY Mellon.
U.S. Treasuries finished the session slightly higher, pushing yields lower. The 2-yr yield declined three basis points to 1.62%, and the 10-yr yield declined one basis point to 1.68%. The U.S. Dollar Index was unchanged at 99.10. WTI crude fell 0.9% (-$0.51) to $55.90/bbl, returning to levels before the drone attack on Saudi Arabia's oil refineries two weeks ago.
Reviewing Friday's batch of economic data:
- Personal income was up 0.4%, as expected, in August, while personal spending was up 0.1% (Briefing.com consensus +0.3%). The PCE Price Index was unchanged (Briefing.com consensus +0.1%), leaving it up 1.4% yr/yr for the fourth straight month, and the core PCE Price Index, which excludes food and energy, was up 0.1% (Briefing.com consensus +0.2%), leaving it up 1.8% yr/yr, versus up 1.7% in July.
- The key takeaway from the report is that real PCE was up only 0.1% in August, which will temper growth forecasts for Q3 GDP.
- The final September reading for the University of Michigan's Index for Consumer Sentiment printed at 93.2 (Briefing.com consensus 92.1), up from the preliminary reading of 92.0 and the final reading of 89.8 for August.
- The key takeaway from the report is the finding that consumers are starting to express rising levels of economic uncertainty, with trade policies having the greatest negative impact on consumers.
- Durable goods orders increased 0.2% in August (Briefing.com consensus -1.0%), which was better than expected, while durable goods orders excluding transportation jumped 0.5% (Briefing.com consensus +0.2%).
- The headline numbers were good, yet the key takeaway from the report is that nondefense capital goods orders excluding aircraft declined 0.2%, which is a soft sign for third quarter business spending.
Looking ahead, investors will receive the Chicago PMI for September on Monday.
- Nasdaq Composite +19.7% YTD
- S&P 500 +18.2% YTD
- Dow Jones Industrial Average +15.0% YTD
- Russell 2000 +12.8% YTD
Market Snapshot
| Dow | 26820.25 | -70.87 | (-0.26%) | | Nasdaq | 7939.63 | -91.03 | (-1.13%) | | SP 500 | 2961.83 | -15.83 | (-0.53%) | | 10-yr Note | +2/32 | 1.681 |
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| | NYSE | Adv 1320 | Dec 1553 | Vol 1320 | | Nasdaq | Adv 1075 | Dec 2028 | Vol 2.0 bln |
Industry Watch
| Strong: Financials, Energy |
| | Weak: Information Technology, Real Estate, Communication Services | |
