Wall Street suffers worst week since March
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