Stocks traded lower Monday, building on the previous week’s decline on lingering worries over U.S.-China trade tensions and continued unrest in Hong Kong.
How are the major benchmarks performing?
The Dow Jones Industrial Average DJIA, -1.23% fell 227 points, or 0.9%, to 26,056, while the S&P 500 index SPX, -1.10% shed 22 points, or 0.8%, to 2,896. The Nasdaq Composite Index COMP, -0.99% dropped 57 points to 7,902, down 0.7%.
The Dow saw a 0.8% fall last week to end Friday at 26,287.44, while the S&P saw a 0.5% weekly fall to 2,918.65. The Nasdaq finished 0.6% lower last week at 7,959.14.
What’s driving the market?
Equity investors remain wary of U.S.-China trade tensions, which increased last week after China last Monday allowed its yuan currency to weaken, trading above 7 per dollar. The U.S. Treasury responded by formally branding China a currency manipulator.
Further fueling concern were comments by President Trump Friday morning that planned trade talks in September might not happen. The rhetoric follows the announcement earlier this month that the U.S. planned to implement a 10% tariff on the $300 billion in annual Chinese exports that have so far avoided new trade duties.
“Unlike previous rounds of tariffs deployed by this administration, these new tariffs would largely impact the consumer, with duties being placed on goods such as clothing, footwear and toys,” wrote Jason Pride, chief investment officer of private wealth and Glenmede in a Monday research note. “The consumer has acted as the engine driving forward this record-long expansion as manufacturing slows, but these tariffs may erode their spending power,” he added.
Meanwhile, investors are also monitoring events in Hong Kong, where authorities canceled more than 130 flights as thousands of demonstrators thronged the city’s airport to protest police for their handling of this summer’s protests.
Goldman Sachs, in a Sunday note to clients, said it now expects a 0.6% drag on the U.S. economy due to trade-war developments, up from its earlier estimate of 0.2%. Goldman lowered its forecast for fourth-quarter gross domestic product by 20 basis points to 1.8%.
“Fears that trade war will trigger a recession are growing,” wrote Jan Hatzius, the firm’s chief U.S. economist.
Second-quarter earnings season will be all but in the books after this week. Through Friday, 90% of S&P 500 companies had reported results.
FactSet said that the blended earnings decline for the second quarter stood at 0.7%, a measure that combines actual results for companies that have reported and estimated results for companies that have yet to report.
If -0.7% is the actual decline for the quarter, it would mark the first time the index has reported two straight quarters of year-over-year declines in earnings since the first and second quarters of 2016, according to FactSet data. The blended revenue growth rate for the second quarter stood at 4.1%, which, if it holds, would mark the lowest revenue growth rate for the index since a 2.7% pace in the third quarter of 2016.
It’s a busy week for economic data, including the July consumer-price index on Tuesday, while Thursday brings July retail sales.
Which stocks are in focus?
Shares of Kraft Heinz Co. could be in focus after Fitch Ratings warned that the food and beverage manufacturer’s credit could soon hit junk status, after revising its outlook on the firm from stable to negative. The stock fell 14% in the two days ended Friday, after the company issued disappointing, preliminary first-half results. Shares fell 0.4% Monday.
Barrick Gold Corp. GOLD, -0.03% stock rose 2.2%, after reporting upbeat guidance for gold production along with its second-quarter earnings results.
Troubled Canadian cannabis company CannTrust Holdings Inc. CTST, -26.19% fell around 50% after disclosing it had received a report from Health Canada informing it that its manufacturing facility in Vaughan, Ontario, wasn’t compliant with certain regulations.
How are other markets trading?
The yield on the 10-year U.S. Treasury note TMUBMUSD10Y, -5.33% fell 7 basis points to 1.664%.
In Asia overnight, stocks were mostly higher, with the China CSI 300 000300, +1.80% rising 1.8%, while Japan’s Nikkei 225 NIK, +0.44% added 0.4%. Hong Kong’s Hang Seng Index HSI, -0.44%, meanwhile lost 0.4%. European stocks were trading lower Monday, down 0.2%, as measured by the Stoxx Europe 600 SXXP, -0.31%.
In commodities markets, the price of oil CLU19, +0.61% rose 0.1% to about $54.50 per barrel and the price of gold GCQ19, +0.56% added 0.5% to roughly $1,504 per ounce. The U.S. dollar DXY, -0.07%, meanwhile, edged less than 0.1% lower relative to its major counterparts.