U.S. Stocks Drop Amid Geopolitical Tensions -- Update
22 October 2018 - 10:15PM
Dow Jones News
By Will Horner and Michael Wursthorn
Falling shares of financial and energy companies pulled the Dow
Jones Industrial Average lower, resuming a stock market selloff
that has knocked the broad index further from its highest levels of
the year.
After initially opening higher, mounting losses among Goldman
Sachs Group, Exxon Mobil and other financial and energy firms
sapped the Dow industrials of an early gain, eventually pulling the
blue-chip index down 208 points.
While some of those stocks pared deeper losses, the Dow
industrials still closed down 126.93 points, or 0.5%, to 25317.41
on Monday, putting the closely watched index on poor footing to
start the week.
For investors, Monday's losses have cast some doubt on whether
another quarter of strong earnings are enough to get the Dow, the
S&P 500 and other major indexes back into record-setting
territory. A combination of worries -- from ongoing trade tensions
to concerns about Italy and fresh geopolitical tensions between the
U.S. and Saudi Arabia -- have made October one of the most volatile
months for stocks this year, knocking the Dow industrials off more
than 5% from its early-October record high.
"There was hope we'd get a little more of a bounce from
earnings," said Larry Peruzzi, a managing director at Mischler
Financial Group. "But the market is more concerned with where
fourth-quarter earnings might end up."
The Dow fell a third session out of the last four trading days,
a stretch that has seen more than 450 points fall off the blue-chip
index. The S&P 500 fell 11.90 points, or 0.4%, to 2755.88.
The Nasdaq Composite, however, added 0.3%, as technology and
other growth companies fared better, snapping the index's
three-session losing streak.
While S&P 500 companies are expected to report another
quarter of double-digit profit growth, the earnings boom that
helped power much of the broad index's 3.3% gain this year is
showing signs of fading. After the third quarter, earnings and
sales expansion across the index are set to come down, with growth
decelerating even further in 2019, once companies lose the
immediate benefits of the sweeping corporate tax cut, according to
FactSet.
Take Halliburton, for example, which reported third-quarter
revenue and profits ahead of analysts' expectations, while the
company said demand for some of its services came in weaker than
expected, weighing on its outlook for the rest of the year.
Halliburton shares fell 3.2% in recent trading.
Investors took the warning as a sign of bigger problems
throughout the energy sector, pulling the S&P 500 sector down
1.1%.
Financial stocks also struggled, with many giving up some of
their post-earnings gains from last week and as bond yields showed
signs of stabilizing.
Shares of Synchrony Financial fell 6%, even though earnings had
come ahead of expectations on Friday, while Goldman Sachs fell
2.4%.
Financial declines were broad enough to send the KBW Nasdaq Bank
Index of large U.S. lenders down 2.7%.
Investors are expected to look more closely at the slate of
earnings announcements due this week, analysts said. About 36% of
the market capitalization of the S&P 500 is expected to report
earnings this week, according to BlackRock. Tech giants like
Alphabet and Amazon.com are expected to report quarterly results
later this week.
The losses followed mostly upbeat trading in Asia after proposed
Chinese tax cuts drove bumper gains for Chinese equities. European
equities, which had been trading higher following the news, also
turned lower soon after trading began in the U.S.
The Shanghai Composite rose 4.1%, its biggest one-day percentage
gain since March 2016, continuing a rally in Chinese stocks that
began late last week. Hong Kong's Hang Seng added 2.3%, while
Japan's Nikkei gained 0.4% to snap a two-day losing streak.
"When it comes to thinking about Chinese stimulus, the
government is finally starting to get the message and is focusing
on tax reform and away from investment," said Geoffrey Yu, head of
the U.K. investment office at UBS Global Wealth Management. "If
this can help the Chinese household it doesn't just help China, it
helps the world."
Write to Michael Wursthorn at Michael.Wursthorn@wsj.com
(END) Dow Jones Newswires
October 22, 2018 17:00 ET (21:00 GMT)
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