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Stocks fall, US budget deficit widens to six-year high

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Stocks fell Monday after a choppy day of trading.

The S&P 500 (^GSPC) declined 0.59%, or 16.34 points, while the Dow (^DJI) slipped 0.35%, or 89.44 points as of market close. The Nasdaq (^IXIC) fell 0.88%, or 66.15 points. The tech sector led declines, and each of the FANG names posted losses at the end of regular trading.

Last week’s plummet in equities slashed $2.6 trillion in value from global equity markets. The S&P 500 and Dow each fell more than 4% for the week, while the Nasdaq’s weekly losses came in around 3.7%.

Experts’ explanations for the stock sell-off were mixed, with investors pointing to factors including rising interest rates, technology stock valuations and trade tensions. The yield on the 10-year Treasury note rose to 3.26% last week, its highest level since 2011. The yield on the 10-year note was at 3.158% as of 3:18 p.m. ET, while the yield for the 30-year Treasury note rose to 3.338%.

NEWS: Trump says he “might” impose more tariffs on China, Hurricane Michael recovery continues

President Donald Trump said in an interview Sunday on CBS’s 60 Minutes that he “might” impose more tariffs on China, adding to the levies on $250 billion worth of Chinese imports already in place. However, he said he is not intending to push China into an economic depression.

“They want to negotiate,” Trump said. He added, “I have a great chemistry … with President Xi of China. I don’t know that that’s necessarily going to continue. I told President Xi we cannot continue to have China take $500 billion a year out of the United States in the form of trade and other things … and I said we can’t do that, and we’re not going to do that anymore.”

Recovery work has begun for Hurricane Michael, which struck the southeast last week in one of the most powerful storms the country has seen in this century. The death toll following the storm climbed to at least 18 people as of Saturday, CNN reported. Hurricane Michael left about 1.55 million people in six states without power Friday. As of Sunday, more than 58 evacuations and 403 rescues or assists had been completed by several U.S. agencies in the days since Hurricane Michael made landfall. More than 19,000 individuals or households have registered for disaster assistance, FEMA said in a statement.

STOCKS: BofA beats on profit, Sears files for bankruptcy

Bank of America (BAC) benefited from rising interest rates in the third quarter, with the second-largest U.S. lender posting quarterly profits that beat expectations. Net income rose 32% to $7.2 billion, and diluted earnings increased 43% to 66 cents per share versus average analyst expectations of 62 cents. The firm’s lending business generated the most interest income since 2011, with its net interest margin rising to 2.42%. The company also reported a 2% decline in headcount from the third quarter of 2017, helping account for the bank’s lower costs this quarter, with expenses improving to account for 57% of revenue. Bank of America’s stock lost gains made during early trading, falling 1.87% to $27.93 per share as of market close Monday.

Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., October 12, 2018. REUTERS/Brendan McDermid

Sears Holdings (SHLD), the parent company of Sears and Kmart, filed for Chapter 11 bankruptcy protection in New York Monday morning in advance of a debt payment the retailer could not afford. Sears will shutter another 142 stores prior to the end of the year, adding to the 46 store closures the company has already announced. The company has nearly 700 stores and around 68,000 workers, as of the time of the filing. Eddie Lampert, the company’s chairman and largest shareholder, stepped down as CEO of the company, which will now be run by three executives. Shares of Sears fell 23.82% to 31 cents per share at the end of trading Monday.

ECONOMY: U.S. budget deficit expands, retail sales rise at slower-than-expected rate

The U.S. budget deficit widened to $779 billion in the fiscal year ending September 30, expanding by $113 billion from the previous fiscal year, the Treasury Department said in a statement Monday. The deficit for the first full fiscal year that Trump has held office represents the highest since 2012. Outlays rose by $127 billion, while federal revenues increased by $14 billion following a revised tax plan that cut rates for corporations and most individuals.

Retail sales in the U.S. rose 0.1% month-over-month to $509 billion in September, versus the average expectation of a 0.6% increase, according to analysts polled by Bloomberg. The rate of increase in retail sales stayed flat from the revised August 0.1% advance, according to a release from the Commerce Department Monday. Purchases at food-services and drinking establishments fell 1.8% in September, the largest decline in nearly two years, which weighed on retail sales at large. Auto sales rose 0.8% in September, which analysts are attributing to vehicles being replaced following Hurricane Florence.

The core retail control group – which excludes volatile components including food services, auto dealers, building materials and gasoline – rose “a very healthy 0.5%MoM, which was actually above expectations,” analysts from ING Economics wrote in a note. “This series is better aligned to the consumer spending numbers calculated as part of the GDP report and supports our view that the US economy likely expanded close to 4% annualized in 3Q18 after growing at an annualized 4.2% rate in 2Q18. This will be more than enough to keep the Federal Reserve in interest rate hike mode.”

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck

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