By Jessica Menton and David Hodari
U.S. stocks fell sharply Thursday as the arrest of a top Chinese
tech executive and a fresh decline in oil prices exacerbated the
concerns about global growth that have rattled markets in recent
weeks.
The Dow Jones Industrial Average slid 531 points, or 2.1%, to
24496, after earlier tumbling as much as 785 points. The S&P
500 lost 2% as both indexes slid back into the red for the year.
The Nasdaq Composite declined 1.2%, cutting the technology-heavy
index's gains for 2018 to 2.7%.
All 30 stocks in the Dow industrials and all 11 sectors in the
S&P 500 traded lower on the day. Caterpillar and Apple, which
are sensitive to trade-related headlines, tumbled more than 2%. And
Chevron and Exxon slumped about 3% as U.S. crude oil prices resumed
their slide, falling 3.1%.
Thursday's losses put the major indexes on course for their
largest two-day point and percentage declines since Oct. 11.
"Everything feels out of control right now," said Michael
Antonelli, equity sales trader at R.W. Baird & Co. "Clients are
starting to get more jittery."
Markets started the week on a high note after President Trump
reached a 90-day trade truce with his Chinese counterpart over the
weekend, but that optimism turned to caution Tuesday, when the Dow
industrials plunged nearly 800 points on renewed fears about the
pace of economic growth.
U.S. markets were closed Wednesday for a national day of
mourning for President George H.W. Bush.
Canadian authorities arrested Huawei Technologies' chief
financial officer over alleged violations of sanctions on Iran,
which fanned fears of another escalation in tensions between the
world's two largest economies. Market reaction to the arrest threw
into sharp relief the obstacles that lie ahead for negotiators in
Washington and Beijing.
"Markets were already under pressure, and the arrest hasn't
helped," said Neil Mellor, senior currency strategist at BNY
Mellon. "We're back to where we were beforehand, and we're
wondering if a deal's possible given how high the stakes are."
Justin Wiggs, managing director in equity trading at Stifel
Nicolaus, said his clients were concerned most Thursday about
liquidity, or ease of trading, among stocks. He has noticed that
investors are selling recent outperformers to buy peers that are
underperforming.
"If you think you can buy stocks cheaper later, it makes sense
to cancel your buy tickets," said Mr. Wiggs. "If everyone jumps on
that bandwagon, there are no buyers left, and that's when you get
these pockets of liquidity that become an issue."
Tech firms have been among those worst hit by icy trade
relations between the U.S. and China, weighing on global markets
and prompting fears of slowing global growth. Dow components Apple
and Intel fell 2% and 0.3%, respectively. Microsoft fell nearly
1%.
Even so, some wealth-management professionals are sticking with
technology. Ron Weiner, managing director and partner of RDM
Financial Group at HighTower, is advising clients that stocks are
still a long-term value, specifically technology and health-care
shares, over defensive-oriented sectors such as consumer
staples.
"If my choice is to buy Apple or Clorox, I'm staying in Apple,"
Mr. Weiner said, adding that buying defensive stocks right now
might feel safe, but technology companies, including Intel and
Microsoft, still pay a decent dividend. "When you're in the middle
of this kind of turmoil, it's hard to think, but this is exactly
when you need to stay steady, look over the horizon and wait."
U.S. Treasury yields continued slumping. The yield on the
benchmark U.S. 10-year Treasury note was last 2.860%, slipping from
2.921% late Tuesday. Yields move inversely to prices.
U.S. government bonds are on the edge of a yield-curve
inversion, where shorter-dated bonds yield more than longer-dated
ones. An inverted curve is often interpreted as a signal of a
looming recession.
Michael Arone, chief investment strategist for State Street
Global Advisors, shook off recession fears, saying that even though
earnings growth for S&P 500 companies is expected to slow next
year, he still expects earnings-per-share growth of 9% year over
year.
"The U.S. has never had a recession when U.S. corporate profits
have been growing," Mr. Arone said. "So although the backdrop is
shifting somewhat from a higher growth regime to a lower growth
regime, it's too early to call the end of the bull market."
In addition to headlines out of China, U.S. investors were
awaiting a speech later Thursday from Federal Reserve Chairman
Jerome Powell, which will be scrutinized for signals related to the
central bank's interest-rate policy.
While CME data gave a 76.6% probability of a rate increase at
the Fed's December meeting, figures show a less clear consensus for
2019, reflecting estimates of just over one rate raise. But some
analysts see that as an overly dovish forecast.
Investors will turn their attention to Friday's highly
anticipated employment report. Economists surveyed by The Wall
Street Journal expect employers added 198,000 jobs during the month
and unemployment held at 3.7%.
Economists expect a further acceleration in average-hourly
earnings, projecting wages advanced 3.2% for the month from a year
earlier. Hourly wages rose 3.1% in October from a year ago, the
best annual growth rate since 2009.
Mr. Arone said that as long as Friday's wage figures don't
significantly accelerate, the markets will likely respond
positively because it may ease inflation worries.
Meanwhile, U.S. crude fell 3.1% to $51.25 a barrel, after Saudi
Arabia's oil minister said there hadn't yet been any agreement made
over oil output cuts. Still, market participants were expecting an
agreement to emerge in Vienna, where the Organization of the
Petroleum Exporting Countries and its allies were scheduled to meet
Thursday and Friday.
Bleak sentiment in the U.S. echoed that in Europe, where the
Stoxx Europe 600 index slid 3.1%. Losses were heavy in Asia, where
Japan's Nikkei 225 fell 1.9% and China's Shanghai Composite dropped
1.7%.
Mike Bird contributed to this article
Write to Jessica Menton at Jessica.Menton@wsj.com and David
Hodari at David.Hodari@dowjones.com
(END) Dow Jones Newswires
December 06, 2018 14:00 ET (19:00 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.