Wall Street suf­fers worst week since March

The Globe and Mail (Ottawa/Quebec Edition) - - REPORT ON BUSINESS -

Mar­kets plunge amid con­cerns over U.S.-China trade re­la­tions and in­ter­est-rate pol­icy

Wall Street’s main in­dexes fell more than 2 per cent on Fri­day in a broad sell-off led by de­clines in big in­ter­net and tech­nol­ogy shares, and posted their largest weekly per­cent­age drops since March as con­cerns over U.S.-China trade ten­sions and in­ter­est rates con­vulsed Wall Street.

The S&P 500 erased vir­tu­ally all of its gains from a week ear­lier, when the benchmark in­dex notched its big­gest weekly rise in seven years. The Cana­dian stock mar­ket also fell, but losses were not as se­vere as in the United States. Af­ter a week­end truce be­tween Wash­ing­ton and Bei­jing in talks in Ar­gentina, stocks have been volatile all week as in­vestors comb through the news look­ing for signs of whether a trade-ten­sion cloud over the stock mar­ket would dis­si­pate.

Con­cerns over U.S.-China trade re­la­tions were fanned by White House trade ad­viser Peter Navarro’s com­ments that U.S. of­fi­cials would raise tar­iff rates if the two coun­tries could not come to an agree­ment dur­ing a 90-day ne­go­ti­at­ing pe­riod.

Along with trade, Wall Street has been fo­cused on bond yields and the di­rec­tion of in­ter­est rate pol­icy from the Fed­eral Re­serve, with some in­vestors ex­pect­ing a slower pace of hikes than pre­vi­ously an­tic­i­pated.

“It’s a cri­sis of con­fi­dence on the trade sit­u­a­tion, what’s go­ing to hap­pen there, and maybe a lit­tle bit of a cri­sis of con­fi­dence in the Fed, given how quickly they have got to change their tune,” said Walter Todd, chief in­vest­ment of­fi­cer at Green­wood Cap­i­tal As­so­ciates in Green­wood, S,C.

The Dow Jones In­dus­trial Av­er­age fell 558.72 points, or 2.24 per cent, to 24,388.95, the S&P 500 lost 62.87 points, or 2.33 per­cent, to 2,633.08 and the Nas­daq Com­pos­ite dropped 219.01 points, or 3.05 per cent, to 6,969.25.

Tech­nol­ogy shares tum­bled, with the S&P 500 tech sec­tor down 3.5 per cent. Health­care shares, the big­gest gainer among ma­jor S&P sec­tors this year, drop- ped 2.5 per cent.

The S&P 500’s 50-day mov­ing av­er­age fell be­low its 200-day mov­ing av­er­age, a phe­nom­e­non known as a “death cross” and one that some mar­ket watch­ers see as a bear­ish near-term sig­nal.

For the week, the Dow fell 4.5 per cent, the S&P 500 slid 4.6 per cent and the Nas­daq dropped 4.9 per cent. The Dow Jones Trans­port Av­er­age tum­bled 8 per cent for the week, its big­gest weekly drop in more than seven years. The small-cap Rus­sell 2000 fell 5.6 per cent, its big­gest weekly drop since Jan­uary, 2016.

Gov­ern­ment data showed U.S. job growth slowed in Novem­ber and wages in­creased less than fore­cast, suggest­ing some mod­er­a­tion in eco­nomic ac­tiv­ity that could sup­port ex­pec­ta­tions of fewer in­ter­est rate in­creases from the Fed in 2019. The Fed is due to meet Dec. 18-19. “Peo­ple were ex- pect­ing a stronger labour mar­ket re­port,” said Char­lie Ri­p­ley, se­nior mar­ket strate­gist for Al­lianz In­vest­ment Man­age­ment in Min­neapo­lis. “It was a lit­tle bit weaker on the mar­gin, but nonethe­less it’s go­ing to give the Fed some food for thought as they … de­bate how they’re go­ing to shape pol­icy for the up­com­ing year.”

Canada’s S&P/TSX Com­pos­ite In­dex fell 141.87 points, or 0.95 per cent, to 14,795.13. The TSX’s en­ergy group rose 1.09 per cent as crude oil prices ral­lied af­ter OPEC mem­bers and al­lies such as Rus­sia agreed to re­duce out­put to drain global fuel in­ven­to­ries and sup­port the mar­ket. The crude oil gains were capped by con­cerns that the cuts would not off­set grow­ing pro­duc­tion.

Peo­ple were ex­pect­ing a stronger labour mar­ket re­port. CHAR­LIE RI­P­LEY SE­NIOR MAR­KET STRATE­GIST FOR AL­LIANZ IN­VEST­MENT MAN­AGE­MENT

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