Stocks got hit pretty hard on Monday amid escalated fears that the U.S. and China are headed towards a full-blown trade war. Losses were broad-based, with declining issues outnumbering advancing issues 3 to 1 on the New York Stock Exchange. However, the market did settle notably above session lows thanks to some late comments from the White House.
The S&P 500 lost 1.4%, but did manage to close a tick above its 50-day moving average despite spending most of the session below the key technical level. The Dow, meanwhile, lost 1.3% and suffered some technical damage, closing below its 200-day moving average for the first time in two years. The Nasdaq was particularly weak, losing 2.1%, as tech shares struggled, and the Russell 2000 lost 1.7%.
Trade war fears were escalated after a weekend report from The Wall Street Journal that the Trump administration is looking to bar Chinese companies from investing in U.S. technology firms. Treasury Secretary Steven Mnuchin refuted the report in a tweet on Monday morning, saying the administration is targeting all countries attempting to "steal our technology", not just China.
Then things got a little confusing.
Peter Navarro, President Trump's top trade adviser, made a late-day appearance on CNBC, saying the sell off was a "very large overreaction" and insisting that the White House has no plans to impose investment restrictions. Mr. Navarro's comments boosted the market, cutting the S&P 500's loss from 2.0% at its session low to 1.2% at its afternoon high.
Nine of eleven S&P sectors finished Monday in negative territory, with growth-sensitive groups being the weakest performers. The top-weighted technology sector (-2.3%) finished at the bottom of the sector standings. Chipmakers were particularly weak, evidenced by a 3.1% drop in the Philadelphia Semiconductor Index, and the tech-heavy FAANG names really struggled; Facebook (FB 196.35, -5.39), Apple (AAPL 182.17, -2.75), Amazon (AMZN 1663.15, -52.52), Alphabet (GOOG 1124.81, -30.67), and Netflix (NFLX 384.48, -26.61) lost between 1.5% and 6.5%.
Elsewhere, Harley-Davidson (HOG 41.57, -2.64) tumbled 6.0% after announcing it won't raise prices to cover the cost of the EU's reciprocal tariffs; instead, it'll work to shift production to international facilities. Carnival (CCL 58.54, -4.99) was also a notable laggard, losing 7.9%, after disappointing guidance outweighed upbeat quarterly results.
On a positive note, the countercyclical consumer staples (+0.4%) and utilities (+1.7%) sectors closed Monday in the green. Within the consumer staples space, Campbell Soup (CPB 42.23, +3.63) surged 9.4% and Kraft Heinz (KHC 63.32, +0.11) added 0.2% following a NY Post report that Kraft might be interested in acquiring the soup maker.
U.S. Treasuries rose amid the flight to safety, sending yields lower across the curve. The yield on the benchmark 10-yr Treasury note slipped two basis points to 2.88%. Meanwhile, the CBOE Volatility Index, often referred to as the "investor fear gauge", spiked 28.8%, hitting its highest level since late April.
Reviewing Monday's economic data, which was limited to the New Home Sales report for May:
- New Home Sales in May hit an annualized rate of 689,000, which is above the Briefing.com consensus of 666,000. The April reading was revised to 646,000 (from 662,000).
- The key takeaway from the report is that there wasn't any growth in new home sales outside the South region. That is the largest region for new home sales, though, and where there is a concentration of lower-priced housing markets, which helps explain the year-over-year drop in median and average selling prices.
On Tuesday, investors will receive the Case-Shiller 20-City Index for April and the Conference Board's Consumer Confidence Index for June.
- Nasdaq Composite +9.1% YTD
- Russell 2000 +8.0% YTD
- S&P 500 +1.6% YTD
- Dow Jones Industrial Average -1.9% YTD
Headlines provided by Briefing.com