U.S. stocks claw back from an early plunge on Fed re­port

The Trentonian (Trenton, NJ) - - BUSINESS - By Alex Veiga

U.S. stocks clawed most of their way back from a deep slide Thurs­day that at one point had wiped out the mar­ket’s gains for the year.

An early plunge briefly knocked more than 700 points off the Dow Jones In­dus­trial Av­er­age as the ar­rest of a se­nior Chi­nese tech­nol­ogy ex­ec­u­tive threat­ened to cause an­other flare-up in ten­sions be­tween Wash­ing­ton and Bei­jing.

The sell-off eased by late af­ter­noon, how­ever, af­ter The Wall Street Jour­nal re­ported that the Fed­eral Re­serve is con­sid­er­ing break­ing with its cur­rent ap­proach of steady in­ter­est rate hikes, fa­vor­ing a wait-and-see ap­proach. That was a re­lief to in­vestors wor­ried that the Fed might raise in­ter­est rates too fast, which could choke off eco­nomic growth.

“The Fed is try­ing to, in essence, come out and make it clear they are not on a rigid sched­ule of rate hikes next year,” said Quincy Krosby, chief mar­ket strate­gist at Pru­den­tial Fi­nan­cial.

The S&P 500 in­dex fell 4.11 points, or 0.2 per­cent, to 2,695.95. The bench­mark in­dex had been down as much as 2.9 per­cent.

The Dow dropped 79.40 points, or 0.3 per­cent, to 24,947.67. The av­er­age briefly slumped as much as 784 points.

The tech­nol­ogy-heavy Nas­daq com­pos­ite re­versed an early loss to fin­ish with a gain, adding 29.83 points, or 0.4 per­cent, to 7,188.26.

The Rus­sell 2000 in­dex of small-com­pany stocks gave up 3.34 points, or 0.2 per­cent, to 1,477.41.

U.S. stock and bond trad­ing were closed Wed­nes­day be­cause of a na­tional day of mourn­ing for Pres­i­dent Ge­orge H.W. Bush.

Traders con­tin­ued to shovel money into bonds, a sig­nal that they see weak­ness in the econ­omy ahead. The yield on the 10-year Trea­sury note fell to 2.87 per­cent from 2.92 per­cent on Tues­day.

Volatil­ity has gripped the mar­ket since early Oc­to­ber. In­vestors have wor­ried that the Fed might over­shoot with its cam­paign of rate in­creases and put the brakes on the U.S. econ­omy. Like­wise, traders fear that a pro­longed trade dis­pute be­tween the U.S. and China could slow the global econ­omy and crimp cor­po­rate prof­its. The mar­ket’s mood can quickly swing de­pend­ing on what it hears on ei­ther of those is­sues.

Last week, stocks jumped af­ter Fed Chair­man Jerome Pow­ell in­di­cated the cen­tral bank might con­sider a pause in rate hikes next year while it gauges the im­pact of its credit tight­en­ing pro­gram.

The Fed has raised rates three times this year and is ex­pected to boost rates for a fourth time at its Dec. 18-19 meet­ing of pol­i­cy­mak­ers. That steady pace of rate hikes has be­gun to worry some in­vestors amid grow­ing signs that some sec­tors of the econ­omy are hurt­ing, in­clud­ing the hous­ing mar­ket. At the same time, there has been grow­ing ev­i­dence that global eco­nomic growth is slow­ing.

“The mar­ket seems right now to be fo­cused on in­creased risks for a 2020 re­ces­sion,” said Pa­trick Schaf­fer, Global In­vest­ment Spe­cial­ist, J.P. Mor­gan Pri­vate Bank. “It’s a very hard mar­ket to buy when you see re­ally strong sig­nals that we are in­deed late (in the eco­nomic) cy­cle.”

Thurs­day’s ini­tial wave of selling in the mar­ket came about as traders re­acted to the news that Cana­dian au­thor­i­ties ar­rested the chief fi­nan­cial of­fi­cer of China’s Huawei Tech­nolo­gies on Wed­nes­day for pos­si­ble ex­tra­di­tion to the U.S. The Globe and Mail news­pa­per, cit­ing law en­force­ment sources, said Meng Wanzhou is sus­pected of try­ing to evade U.S. trade curbs on Iran.

Meng is a prom­i­nent mem­ber of Chi­nese so­ci­ety as deputy chair­man of the board and the daugh­ter of com­pany founder Ren Zhengfei. China de­manded Meng’s im­me­di­ate re­lease.

The ar­rest came less than a week af­ter Pres­i­dent Don­ald Trump met with Chi­nese Pres­i­dent Xi Jin­ping at the G-20 sum­mit in Ar­gentina. Trump and Xi agreed to a tem­po­rary, 90-day stand-down in their trade dis­pute.

On Thurs­day, China’s gov­ern­ment said it would promptly carry out the tar­iff cease-fire with Wash­ing­ton. It also ex­pressed con­fi­dence that the two na­tions can reach a trade agree­ment. The re­marks sug­gest Bei­jing wants to avoid dis­rup­tions from Meng’s ar­rest. Even so, in­vestors re­mained skep­ti­cal. “Trade ten­sions aren’t go­ing away,” Schaf­fer said. “Con­tra­dic­tory state­ments from the ad­min­is­tra­tion have given some peo­ple a lit­tle bit of pause with re­spect to the op­ti­mism that peo­ple felt fol­low­ing the Ar­gentina G-20 con­fer­ence.”


Trader Gre­gory Rowe works on the floor of the New York Stock Ex­change, Thurs­day. U.S. stocks clawed most of their way back from a deep slide Thurs­day that at one point had wiped out the mar­ket’s gains for the year.

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