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Stock Market News For May 20, 2019

Zacks Equity Research

Wall Street closed in the red on Friday following news that the trade-related negotiations between the United States and China have stalled. Investors sold risky assets like equities due to concerns about global economic slowdown. All three major stock indexes ended in negative territory. For the week as a whole, these indexes finished in the red too.

The Dow Jones Industrial Average (DJI) declined 0.4% to close at 25,764. The S&P 500 shaded 0.6% to close at 2,859.53. Meanwhile, the Nasdaq Composite Index closed at 7,816.28, dropping 1%. The fear-gauge CBOE Volatility Index (VIX) increased 4.4% to close at 15.96. A total of 6.71 billion shares were traded on Friday, lower than the last 20-session average of 6.98 billion. Decliners outnumbered advancers on the NYSE by a 2.96-to-1 ratio. On Nasdaq, a 2.52-to-1 ratio favored declining issues.

How Did The Benchmarks Perform?

The Dow closed in negative territory with 21 components of the 30-stock blue-chip index closing in the red while nine finished in the green. The S&P 500 also closed in the red.The Industrials Select Sector SPDR (XLI) and Energy Select Sector SPDR (XLE) declined 1.1% and 1%, respectively. Notably, ten out of eleven sectors of the benchmark index closed in the red while one finished in the green. Moreover, tech-heavy Nasdaq Composite also declined due to weak performance by trade-sensitive large-cap stocks.

U.S.–China Trade Negotiations Stall

On May 17 CNBC reported that the U.S.-China trade negotiations appear to have stalled as it remains unclear what the two sides will discuss.Wall Street faced extreme volatility following President Donald Trump’s tweet on May 5, in which he expressed his displeasure about the progress of U.S.-China trade negotiations and threatened to hike tariffs on Chinese goods.

On May 10, the U.S. government hiked existing tariff rates to 25% from 10% on $200 billion of Chinese exports. In 2018, the Trump administration imposed 25% tariff on $50 billion of Chinese goods. Moreover, President Trump threatened to levy 25% tariff on another $325 billion of Chinese goods. China had imposed $110 billion tariffs on U.S. exports in 2018. Following the hike of U.S. tariff, China 25% tariff on an additional $60 billion U.S. goods effective Jun 1, 2019.

On May 15, President Donald Trump issued an executive order declaring a national emergency preventing U.S. corporates from using information and communications technology equipment from sources as this “poses an unacceptable risk to the national security of the United States.”

Following the order, the Department of Commerce added Chinese telecom behemoth Huawei Technologies and its affiliates to the Bureau of Industry and Security (BIS) Entity List. Another Chinese telecom giant ZTE may also face the same fate. The latest move by the U.S. government further jeopardized the lingering trade-related disputes between the two countries.

Consequently, shares of the U.S. suppliers to Huawei such as Qualcomm Inc. QCOM, Qorvo Inc. QRVO and Micron Technology Inc. MU tumbled 1.6%, 6.1% and 3.4%, respectively. Qorvo carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Weekly Roundup

The last week was a disappointing one in the Wall Street. All three major stock indexes lost ground. The Dow declined 0.7%, marking its fourth-straight weekly losses. Notably, this was the Dow’s biggest weekly losing streak since May 2016. The S&P 500 and Nasdaq Composite dropped 0.8% and 1.3%, respectively. Both indexes recorded their second-straight weekly losses.

The trade-related tension which intensified since the second week of May has further escalated. After the U.S. government hiked existing tariff rate to 25% from 10% on $200 billion Chinese goods, China retaliated by imposing 25% tariff on $60 billion U.S. goods. Furthermore, President Trump blacklisted Chinese telecom giant to do business with any U.S. corporate.

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