The Dow tumbled Monday, giving up early gains amid doubts over whether a U.S.-China trade deal would spark a quick recovery in the global economy.
The Dow Jones Industrial Average fell 0.79%. The S&P 500 lost 0.39%, while the Nasdaq Composite fell 0.23%. The Dow had been off as many as 415 points before bargain hunters came into the market.
After months of uncertainty, the U.S. and China are close reaching a détente as soon as this month. But early investor euphoria quickly turned sour, sending stocks sharply lower, as investors questioned whether a trade deal would revive global growth as many headwinds loom, including Brexit, a potential U.S.-Europe trade war and an economic slowdown in China.
Some have argued that while a resolution to the trade war would boost global markets and prop up Chinese equities, it would do little do address some of Beijing’s main economic woes. These have more to do with a rapidly modernizing economy than weakness in global trade.
Trade-sensitive stocks were mixed as Boeing (NYSE:BA) slipped 1.8%, but Caterpillar(NYSE:CAT) ended the day higher.
Beyond trade, stocks were also pressured by weakness in financials and health care companies. UnitedHealth Group (NYSE:UNH) was the Dow’s biggest loser, off 4.1%.
Banks fell as government bond yields, which trade inversely to prices, declined amid a flight to safety.
Goldman Sachs (NYSE:GS), Citigroup (NYSE:NYSE:C) and Morgan Stanley(NYSE:NYSE:MS) fell more than 1% as 10-Year Treasury yields ended the day lower.
Falling Treasury yields are seen as a headwind for banks, reducing their net interest margin, the difference between the interest income generated by operations and the amount of interest paid out to their lenders.
In tech, FAANG names proved resilient, helping to limit losses in the broader sector, led by gains in Facebook (NASDAQ:FB) and Amazon.com (NASDAQ:AMZN). But Netflix (NASDAQ:NFLX) was the odd one out, ending the day lower.
In other corporate news, Tesla (NASDAQ:TSLA) fell 3.2% even after the EV company said it would detail specs of its new Model Y crossover SUV next week. The Model Y would fetch a higher price tag and have “slightly less” range than the Model 3, Tesla’s mass market vehicle, CEO Elon Musk said in a tweet on Sunday.
On the economic front, there was little to cheer as construction spending for December undershot economists’ forecasts, adding to concerns about a slowdown in the economy amid a string of downbeat data seen in recent weeks.
December’s report capped a year in which “total outlays grew 4.1% and “(r)esidential spending increased just 3.3% for the year, the slowest pace since 2011 amid sluggish home-building activity,” Wells Fargo said.
Top S&P 500 Gainers and Losers Today:
DISH Network (NASDAQ:DISH), PulteGroup (NYSE:PHM) and Noble Energy(NYSE:NBL) were among the top S&P 500 gainers for the session.
CenturyLink (NYSE:CTL), WellCare Health Plans (NYSE:WCG) and Gap (NYSE:GPS) were among the worst S&P 500 performers of the session.
