By Mark DeCambre, MarketWatch , Chris Matthews
Dow, S&P 500 erase 2018 gains
U.S. stocks closed sharply lower Tuesday, extending a
pre-Thanksgiving rout that has been fueled mostly by a selling in
shares of technology and internet-related companies, but has now
spread to ensnare the broader market. Sharp declines in Target and
Lowe's after disappointing earnings also contributed to the
tone.
U.S. financial markets will be closed Thursday for the
Thanksgiving Day holiday
(http://www.marketwatch.com/story/which-markets-are-closed-on-thanksgiving-2018-11-20)and
see an early close Friday.
How did the benchmarks perform?
The Dow Jones Industrial Average fell 551.8 points, or 2.2%, to
end at 24,465.64, and tumbled by as many as 648 points at the
session's lows. The S&P 500 index was down 48.84 points, or
1.8%, at 2,641.9, while the Nasdaq Composite Indexwas off by 119.65
points to 6,908.82, a drop of 1.7%.
The Nasdaq remains in correction territory, down more than 14%
from August peak, while the S&P closed just 4 points shy of a
correction, defined as a 10% decline from an index's most recent
highs.
The drop erased year-to-date gains for both the Dow and S&P
500, while the Nasdaq now clings to a 0.1% gain on the year.
Month-to-date, the Nasdaq has fallen 5.4%, the S&P and Dow have
retreated 2.6% in November.
Monday's decline resulted in the S&P 500 and the Dow's worst
start to a Thanksgiving week since 2011, while the Nasdaq
registered its worst such start since 2000, according to Dow Jones
Market Data.
What's drove the market?
U.S. investors continued to be plagued by doubts surrounding
slowing global growth, U.S.-China trade relations, and the steady
rise in interest rates that can be expected to continue into next
year. These doubts have accumulated to induce fears that we are
growing nearer to the end of the current economic expansion,
strategists say.
The previously highflying technology sector has the most to lose
from this change in sentiment. Tech stocks extended a decline that
led the market lower Monday, with reports from China adding fuel to
the day's selling after officials in Beijing uncovered widespread
evidence of anticompetitive behavior by Korean rivals. According to
The Wall Street Journal, Beijing investigators implicated Samsung
Electronics (005930.SE), SK Hynix (000660.SE) and Micron Technology
(MU).
Market participants believe that China's investigation may
intensify festering issues around trade relations between China and
other major counterparts, including the U.S.
Oil futures accelerated their decline, plunging 7%, with the
U.S. benchmark finishing at a more-than-one-year low
(http://www.marketwatch.com/story/oil-prices-join-broad-market-retreat-2018-11-20).
The S&P 500 energy sector led decliners, falling 3.3%.
Read:Why plunging oil prices now hurt--yes hurt--the U.S.
economy
(http://www.marketwatch.com/story/heres-how-much-plunging-oil-prices-will-hurt-yes-hurt-the-us-economy-2018-11-20)
Tuesday's selloff was broad-based, but this time led by the Dow,
with all 30 components trading lower on the day, as negative
sentiment and fears of growing macro headwinds spread from tech
investors to traders of blue-chip stocks.
Meanwhile, Target Corp.'s (TGT) stock plunged Tuesday, after the
discount retailer reported fiscal third-quarter earnings and
same-store sales that missed expectations
(http://www.marketwatch.com/story/targets-stock-tumbles-after-profit-same-store-sales-miss-expectations-2018-11-20).
The retailer's loss helped spark a broader selloff in the retail
sector, with the SPDR S&P Retail (XRT) falling more than 3%,
nearly twice the loss suffered by the broader S&P 500
index.
What are strategists saying?
"For years, the tech sector has benefited from broad multiple
expansion," Dave Smith vice president of equity analysis at Bailard
Inc., told MarketWatch. "And it was easy for investors to just ride
that momentum."
After November's tech-heavy selloff that continued Tuesday,
"tech multiples have contracted to be in line with the rest of the
S&P 500, something we haven't seen for years," Smith said,
adding that this creates buying opportunities those brave enough to
wade into today's choppy market.
"It's so hard to say when sentiment is going to turn positive
again," Smith said. "The one thing I can say for sure is that we're
in for more volatility."
"Economic data remain strong, but the trend in the trend is
deteriorating," Peter Lazaroff, co-chief investment officer at
Plancorp, told MarketWatch. He made the case that the recent turn
in sentiment is due to investors believing that we've already
experienced the fastest rates of growth for both the U.S. economy
and corporate earnings.
"Economic conditions are good, but the chances of economic
conditions deteriorating over the next year or more is much higher
than a surprise on the upside," Lazaroff said.
At the same time, Lazaroff emphasized that volatility levels
have merely returned to ordinary levels, whereas the low volatility
that has characterized much of today's bull market is the outlier.
"This sort of price action is extremely normal," he said. "What was
strange was the outsize returns investors have earned in recent
years with effectively no volatility."
Which stocks were in focus?
Shares of Apple Inc. (AAPL) fell 8.9%, extending the previous
session to leave the stock in bear-market territory
(http://www.marketwatch.com/story/apples-stock-on-track-to-open-in-bear-market-territory-joining-all-other-faang-stocks-2018-11-20),
defined as a drop of at least 20% from a recent peak.
Check out: Ray Dalio says it's just like the 1930s for investors
right now'
(http://www.marketwatch.com/story/ray-dalio-says-its-just-like-the-1930s-for-investors-right-now-2018-11-20)
Shares of Kulicke & Soffa Industries Inc. (KLIC) rose 6.7%
Tuesday, after the semiconductor-equipment maker beat fiscal
fourth-quarter earnings expectations. The stock had been down
roughly 12% at the start of trade, before reversing those losses
Monday morning.
Lowe's Cos.'s stock (LOW) fell 5.7%, after the home-improvement
retailer reported fiscal third-quarter earnings that beat
expectations but same-store sales that missed
(http://www.marketwatch.com/story/lowes-stock-drops-after-earnings-beat-but-same-stores-sales-miss-gross-margin-declines-2018-11-20).
Target shares traded 10.5% lower Tuesday, after the retailer
announced
(http://www.marketwatch.com/story/targets-stock-tumbles-after-profit-same-store-sales-miss-expectations-2018-11-20)
fiscal third-quarter earnings and same-store sales that came in
below Wall Street estimates.
Cambell Soup Co. (CPB) shares rose 5.7% Tuesday, after a
third-quarter earnings report
(http://www.marketwatch.com/story/campbell-soup-shares-jump-after-earnings-beat-upbeat-guidance-2018-11-20)
that showed the firm beating earnings estimates, while the company
affirmed its upbeat guidance for 2019.
Hormel Foods Corp. (HRL) closed down 1%, after missing revenue
estimates in a Tuesday morning earnings report.
Shares of Kohl's Corp. (KSS) fell more than 9%, even after the
firm beat Wall Street estimates for earnings and profit and raised
its full-year 2018 guidance. Shares of the discount retailer are
still up 18.9% year-to-date.
Shares of Analog Devices, Inc. (ADI) closed higher, up 4.1%
after beating analyst estimates for fiscal fourth quarter earnings
and revenue in a Tuesday-morning earnings release.
Best Buy Co Inc. (BBY) stock rose 2.1%, following a
Tuesday-morning earnings release that showed the firm beating
earnings and revenue estimates.
Shares of L Brands Inc. (LB) closed down 17.7%, after the
retailer announced Monday evening that it planned to slash its
dividend
(http://www.marketwatch.com/story/l-brands-stock-falls-as-victorias-secret-parent-plans-dividend-cut-2018-11-19).
Agilent Technologies Inc. (A) shares rose 7.8% Tuesday, after
beating analysts estimates
(http://www.marketwatch.com/story/agilent-4th-quarter-profit-rises-2018-11-19-174854319)
for profit and sales in the fourth quarter.
What data did investors watch?
Housing starts came in at a 1.228 million seasonally adjusted
annual rate in October, while permits came in at a 1.263 million
rate, with housing starts coming in just below consensus estimates
per a MarketWatch poll of economists. Year-over-year, growth in
housing starts has steadily slowed in 2018
(http://www.marketwatch.com/story/housing-starts-rebound-in-october-even-as-housing-shortfall-lingers-2018-11-20).
Investors are particularly focused on the housing market after a
disappointing read in home builders' confidence
(http://www.marketwatch.com/story/home-builder-confidence-tumbles-the-most-since-2014-as-housing-headwinds-catch-up-2018-11-19)
on Monday, which contributed to Monday's decline.
How did other markets trade?
Stock markets in Asia traded lower Tuesday
(http://www.marketwatch.com/story/asian-stocks-drop-as-tech-pullback-nissan-ceos-arrest-takes-toll-2018-11-19),
with Japan's Nikkei losing 1.1%, Hong Kong's Hang Seng Index down
2%, and the China's Shanghai Composite Index falling 2.1%.
European stocks declined Tuesday, with the Stoxx Europe 600 ,
and Germany's DAX 30 ending the day down more than 1%. The FTSE 100
, closed Wednesday down 0.7%
Gold declined 0.3% and the U.S. dollar rose 0.5%.
(END) Dow Jones Newswires
November 20, 2018 16:40 ET (21:40 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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