Wall Street closed sharply lower on Thursday as trade-related concerns aggravated. Crude oil prices plunged owing to trade war fears. Consequently, investors opted for safe-haven sovereign bonds, leading to sharp fall in yields. All three major stock indexes ended in the red.
The Dow Jones Industrial Average (DJI) tumbled 1.1% or 286.14 points to close at 25,490.47. The S&P 500 plummeted 1.2% to close at 2,822.24. Meanwhile, the Nasdaq Composite Index closed at 7,628.28, plunging 1.6% or 122.56. The fear-gauge CBOE Volatility Index (VIX) jumped 14.7% to close at 16.92. A total of 7.61 billion shares were traded on Thursday, higher than the last 20-session average of 6.99 billion. Decliners outnumbered advancers on the NYSE by a 3.26-to-1 ratio. On Nasdaq, a 3.84-to-1 ratio favored declining issues.
How Did The Benchmarks Perform?
The Dow closed in negative territory with 24 components of the 30-stock blue-chip index closing in the red while six finished in the green. The S&P 500 also closed in the red.The Energy Select Sector SPDR (XLE) and Technology Select Sector SPDR (XLK) tumbled 3.4% and 1.8%, respectively. Notably, nine out of eleven sectors of the benchmark index closed in the red while two finished in the green. Moreover, tech-heavy Nasdaq Composite ended in negative territory due to weak performance by trade-sensitive large-cap stocks.
Trade Conflict Worsens
On May 22, U.S. Treasury Secretary Steven Mnuchin said the schedule for the next round of trade negotiations with China remains undecided. On May 23, Gao Feng, spokesperson for China’s Ministry of Commerce, said that the United States needs to “adjust its wrong actions” in order to resume trade talks.
So far, the U.S. government has imposed 25% tariffs on $250 billion Chinese goods while China retaliated by slapping 25% tariff on $170 billion of U.S. exports. Further, President Trump expressed his desire to levy 25% tariff on another $325 billion Chines products, which many industry watchers believe could be implemented late this year or early next year.
Additionally, on May 15, the Trump administration blacklisted Chinese behemoth Huawei Technologies from doing business with U.S. counterparts. However, the government granted a 90-day window to U.S. companies to supply inputs to Huawei so that no existing users suffer immediately.
Crude Oil Prices Plunge
Crude oil prices tanked on Thursday as investors think a lingering trade war between the two largest trading countries of the world will result in a global economic slowdown. Moreover, on May 22, the South China Morning Post reported that China is considering reducing purchase of natural gas from the United States.
As a result, the U.S. benchmark West Texas Intermediate crude futures lost $3.51 or 5.7% to settle at $57.91 a barrel, marking its lowest settlement since Mar 12. The global benchmark Brent crude futures fell $3.23 or 4.6% to settle at $67.76 a barrel, posting its lowest settlement since Mar 25.
Consequently, shares of crude oil giants like Exxon Mobil Corp. XOM and Chevron Corp. CVX tanked 2.3% and 2.2%, respectively. Both stocks carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
U.S. Government Bond Yields Plummet
On May 23, yield on the benchmark 10-year U.S. Treasury Note tumbled 9.7 basis points to 2.296%, its lowest since Oct 13, 2017 and the sharpest daily decline since Jan 3, 2019. Yield on the short-term 2-year U.S. Treasury Note tank plunged 10.1 basis points to 2.13%, marking its lowest level since Feb 13, 2018 and biggest daily drop since Jan 3. Meanwhile, yield on the long-term 30-year U.S. Treasury Note skidded 8.6 basis points to 2.732%, its lowest level since Dec 15, 2017 and largest daily decline since Dec 4, 2018.
The Department of Commerce reported that new home sales in April decreased 9.6% to a seasonally adjusted annual rate of 673,000. However, the consensus estimate was 671,000. The metric for March was revised upward to 723,000 from 692,000 reported earlier.
The Department of Labor reported that initial jobless claims declined by 1,000 to a seasonally adjusted 211,000 for the week ended May 18, lower than the consensus estimate of 215,000. The number of people already collecting unemployment benefit rose slightly to 1.68 million.
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