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Wall Street slides on geopolitical, recession fears

Stock MarketsAug 12, 2019 04:36PM ET
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© Reuters. Traders work on the floor at the New York Stock Exchange (NYSE) in New York

By Stephen Culp

NEW YORK (Reuters) - U.S. stocks dropped in a broad sell-off on Monday as simmering geopolitical tensions spooked equity investors and drove a bond market rally while the protracted U.S.-China trade war stoked fears of impending recession.

All three major U.S. stock indexes closed sharply lower in light trading, with little to soothe market jitters over Hong Kong protests, Argentine President Mauricio Macri's primary election defeat, and the U.S.-China tariff dispute that has rattled markets for months.

"The stock market's selling off because the bond market is rallying like crazy," said Brian Battle, director of trading at Performance Trust Capital Partners in Chicago. "There's a flight to safety and there are multiple silos of political uncertainty."

"People are starting to give up and buy treasuries to wait it out," Battle said. "Gold is a beneficiary too."

The flight from risk sent gold prices up 1%, hovering at a more than six-year high.

The closely-watched yield spread between U.S. 2-year and 10-year notes narrowed to its smallest difference since at least 2010, according to Refinitiv data.

Goldman Sachs Group Inc (NYSE:GS) said on Sunday that its economists see recessionary risks increasing as the U.S.-China trade war drags on.

"What investors are coming to realize is that the goings on outside U.S. borders is having an impact on global as well as U.S. economic growth," said Paul Nolte, portfolio manager at Kingsview Asset Management in Chicago. "Investors are coming around to the fact that no matter where interest rates get pegged it will not mitigate the trade issues."

Data on inflation, housing starts and retail sales are due later in the week, and will be scrutinized for further signs of economic softening.

The Dow Jones Industrial Average fell 391 points, or 1.49%, to 25,896.44, the S&P 500 lost 35.96 points, or 1.23%, to 2,882.69 and the Nasdaq Composite dropped 95.73 points, or 1.2%, to 7,863.41.

All 11 major sectors of the S&P 500 ended the session in negative territory, with financials, materials, energy and consumer discretionary suffering the largest percentage drops.

Second-quarter reporting season is approaching the finish line, with 452 of the companies in the S&P 500 having reported. Of those, 73.5% have beaten consensus estimates.

Looking ahead to the third quarter, there have been 58 negative pre-announcements compared with 19 positive, resulting in a 3.1 negative-positive ratio, higher than 2.7 average since 1997, according to Refinitiv.

Streaming platform Roku Inc gained 7.2% after a research note from Needham picked the stock over larger rival Netflix Inc (NASDAQ:NFLX).

Shares of Amgen Inc (NASDAQ:AMGN) advanced 4.9% following a court ruling that upheld two patents relating to its drug Enbrel.

Coach owner Tapestry Inc and Versace owner Capri dropped 3.9% and 4.4%, respectively, after Chinese social media criticized the companies for selling T-shirts that showed Chinese-controlled territories of Hong Kong and Macau as countries.

Media companies CBS Corp (NYSE:CBS) and Viacom Inc are in the final stages of negotiating an all-stock merger that values Viacom at a discount to its Friday closing price, sending Viacom shares down 4.9%.

Declining issues outnumbered advancing ones on the NYSE by a 2.33-to-1 ratio; on Nasdaq, a 2.10-to-1 ratio favored decliners.

The S&P 500 posted 23 new 52-week highs and 22 new lows; the Nasdaq Composite recorded 42 new highs and 170 new lows.

Volume on U.S. exchanges was 6.09 billion shares, compared with the 7.24 billion average over the last 20 trading days.

Wall Street slides on geopolitical, recession fears
 

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Comments (7)
Atmosphere Mind
Atmosphere Mind Aug 12, 2019 3:40PM ET
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**Always enjoy reading those dislikes *joytears - #Orange #Tradewars #TariffMan
Notvery Goodathis
Peteymcletey Aug 12, 2019 1:56PM ET
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Now recession fears. Then in 2 weeks, no fears. Lol.
Patrick Joly
Patrick Joly Aug 12, 2019 1:56PM ET
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lol. I should introduce mine to yours, they would become for sure best friend at once!
Michael Angelo
Michael Angelo Aug 12, 2019 1:29PM ET
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Unfortunately news and networks are lead by advertisements and cashflows from them. In reality there are no so many news to justify why a market breath every minute, hour or day. It's just noise and news services profit from your and their ignor ance. Read one a day the news and don't worry watch the market that will really correct any mistake faster.
Sun Moon
Sun Moon Aug 12, 2019 12:41PM ET
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Truth is, nobody knows exactly WHY the market goes up one day, down the next, etc. etc. Those movements are MUCH too short-term to attribute them to things like "trade fears", etc. etc.  Those observations primarily reflect the political thinking of the authors.
Kenneth Gold
Kenneth Gold Aug 12, 2019 11:54AM ET
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I am fearing that I will not fear..or is it..I am not fearing that I will fear....I am so confused.
Sean Mastro
Sean Mastro Aug 12, 2019 11:45AM ET
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Plenty of other countries to source rare earths from.
Jeff Chevalier
Jeff Chevalier Aug 12, 2019 11:45AM ET
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Uh.. No. That's why they're called "rare" earths and not magnetic dirt.
Ivan Couto Jr
Ivan Couto Jr Aug 12, 2019 10:03AM ET
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please decide!!! One day investeors do not fear. Next day investor fear.. why dont you just tell people the truth?
Jenia Golbstein
Jenia Golbstein Aug 12, 2019 10:03AM ET
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no truth
Sean Mastro
Sean Mastro Aug 12, 2019 10:03AM ET
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Wall Street Traders love to cycle the Week to Week, and Wall Street Investors do not worry about the short term cycling.  Nature of the Beast!!!  China/USA will be at Odds unto 2020 Election, makes sense.  There may even be a HARD DOWN around ELECTION TIME brought to you by The Trump Haters. Prepare to profit, or prepare to loose. its your Call or (Put).
Jason Chang
Jason Chang Aug 12, 2019 10:03AM ET
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Truth is no fundamental to support going upwards, but won't let it go down either. After the election, nobody cares anymore, will all blame it on China!
 
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