U.S. stock markets were routed on Friday after a choppy session. Investors’ sentiment was jeopardized after the trade conflicts between the United States and China escalated. Moreover, the continuation of the U.S. government shutdown resulted in a lack of key economic data. All three major stock indexes ended in negative territory. For the week as a whole, these stock indexes ended in the negative, too.
How Did the Benchmarks Perform?
The Dow Jones Industrial Average (DJI) slid 1.9% or 878.82 points to close at 45,479.60. Notably, 27 components of the 30-stock index ended in negative territory, while three finished in positive territory. At the intraday high, the blue-chip index was up 283.32 points.
The major loser of the index was Amazon.com Inc. AMZN. The stock price of the giant online retailer was down 5%. Amazon.com currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The tech-heavy Nasdaq Composite finished at 22,204.43, plummeting 3.6% or 820.20 points driven by the weak performance of technology bigwigs. This marked the index’s biggest single-day decline since April10. At intraday high, the tech-laden index was up 84 points and at the intraday low, it was up 95.29 points.
The S&P 500 tumbled 2.7% or 182.60 points to finish at 6,552.51, marking the index’s most significant single-day drop since April 10. At the intraday high, the benchmark index was up 27.29 points. Out of the 11 broad sectors of the broad-market index, 10 ended in negative territory, while one was in positive territory.
The technology Select Sector SPDR (XLK), the Energy Select Sector SPDR (XLE), the Consumer Discretionary Select Sector SPDR (XLY), the Industrials Select Sector SPDR (XLI) and the Materials Select Sector SPDR (XLB) tanked 4.1%, 2.9%, 2.8%, 2.2% and 2.1%, respectively.
The fear gauge, the CBOE Volatility Index (VIX) jumped 31.8% to 21.66, posting its highest closing since June 19. A total of 24.26 billion shares were traded on Friday, higher than the last 20-session average of 20.15 billion. Decliners outnumbered advancers on the NYSE by a 4.36-to-1 ratio. On the Nasdaq, a 4.93-to-1 ratio favored declining issues.
U.S.-China Trade Conflicts Escalate
The trade conflicts between the United States and China escalated recently. On Oct. 9, China’s Ministry of Commerce issued a notification requiring all foreign companies to obtain a license to export products from China that contain more than 0.1% of rare earth minerals, whether sourced from China or manufactured using Chinese extraction, refining, magnet-making or recycling technology.
The new rule will be effective Dec. 1. China supplies around 70% of global rare earth minerals, critical components for today’s high-tech world. The United States is a major importer of rare earth minerals considered, extremely valuable and necessary inputs for the semiconductor, defense and automobile industries.
On Oct. 10, the U.S. government retaliated by imposing another 100% tariffs on Chinese exports to the nation over and above what has already been imposed on these products. At present, Chinese goods are subject to an average 40% tariff in the United States. The new tariff of another 100% will be effective from Nov.1.
Government Shutdown Continues
On Oct. 10, the latest U.S. government shutdown entered its 10th day. The Senate failed to reach an agreement between the Republicans and Democrats to provide a stopgap funding for the government. As a result, layoffs of federal workers have started.
Economic Data
The University of Michigan reported that the preliminary index for October consumer sentiment came in at 55 compared with 55.1 in September. However, the Zacks Consensus Estimate was 54. The current economic condition for October came in at 61 compared with 60.4 in September. Consumer expectations for October came in at 51.2 compared with 51.7 in September. Also, 1-year short-term inflation expectation fell marginally to 4.6% in October from 4.7% in September. Long-term inflation expectation held steady at 3.7%.
Weekly Roundup
Last week was disappointing for Wall Street. The U.S. government shutdown and the escalation of U.S.-China trade conflicts significantly dented market participants’ confidence in risky assets like equities. The Dow, the S&P 500 and the Nasdaq Composite tumbled 2.7%, 2.4% and 2.5%, respectively.
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This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
