Stocks reverse direction
Oil production a concern as Dow dives 602 points
Trading turned jittery after two weeks of gains, pulling the Dow Jones industrials down 602 points. Tech stocks took some of the biggest losses.
Stock losses accelerated as markets closed on Monday, pulled down by a broad sell-off in technology companies and revived worries that global economic growth is slowing.
The Dow Jones Industrial Average dropped 602 points, or more than 2 percent, to end Monday at 25,387. The broader Standard & Poor’s 500 index shed 1.97 percent, and the tech-heavy Nasdaq composite closed down 2.78 percent.
“We’re still in that downward trend that started at the end of September,” said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance. “The market is trying to put an appropriate valuation on earnings going forward. All doubt is about forward-looking earnings.”
What happened?
Investors grew concerned after Wells Fargo analysts identified Apple as the unnamed customer that optical communications company Lumentum Holdings said was significantly reducing orders. The news sent Apple’s stock down 5 percent for the day. Lumentum shares plunged almost 33 percent.
Shares in other major tech stocks fell. Advanced Micro Devices gave up 9.51 percent, while Nvidia fell 7.84 percent. Micron Technology lost 4.27 percent.
Banks and consumer-focused companies, and media and communications stocks also took heavy losses.
Saudi Arabia’s plans to curb its oil production next month and possibly into next year only added to investor uncertainty about a global slowdown. Other members of the Organization of Petroleum Exporting Countries (OPEC) may also reduce supply next year.
Crude oil prices initially rose on the news, but fell back after U.S. President Donald Trump tweeted, “Hopefully, Saudi Arabia and OPEC will not be cutting oil production,” and saying prices should be “much lower based on supply!” Crude oil ended down 1.89 percent.
As concerns mounted, investors turned to utilities and other traditionally safe-haven stocks. NRG Energy climbed 3.94 percent.
“It’s a very typical run to the safe assets,” said Ron Weiner, managing director and partner of RDM Financial Group at HighTower Advisors. “But when you analyze in the clear light of day, these are trades you will want to get out of when market starts behaving a bit more normally.”
What to expect
Market watchers are eyeing key data releases this week to help them determine what the Federal Reserve plans to do with interest rates and how China is faring amid trade tensions, Zaccarelli said.The U.S. consumer price index, a gauge of inflation, and the Atlanta Fed Business Inflation Expectations report are due out Wednesday, followed by retail sales on Thursday. In China, the country’s retail sales and industrial production report are expected on Wednesday.
“That will tell us what is happening to the Chinese economy and if the trade conflict is having an effect on them, too,” Zaccarelli said. “If China’s economy decelerates, that’s not good for the global economy.”