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Rough Start To The Week, Tech And China Weigh On Stocks

Stocks closed sharply lower yesterday as big tech led the selloff.

Tech has been exhibiting weakness for a while, so a tech-led decline isn't shocking. But plenty were hoping for a longer respite from the selling than what we got.

Also weighing on stocks is the uncertainty surrounding the U.S./China trade talks. While the market cheered the President's comments last week that he might not impose additional tariffs on China, the billions of dollars of tariffs already in place, from both sides, haven't gone away.

President Trump and President Xi are expected to talk at this month's G20 summit. But that's still more than a week and a half away (Nov. 29th). And there's been lots of mixed signals leading up to this point so it's hard to get a good read on what to expect.

A breakthrough at the meeting would be cheered wholeheartedly. But for now we wait.

In the meantime, it's great to have the seasonally strong months of November and December in play and on deck. Granted, November is still in the minus column. But the month's not over.

The biggest thing going for the market, of course, is the economy. It can almost feel surreal sometimes seeing the market pull back while the economy, employment, and corporate earnings are soaring. But the market is forward looking. And that's why the trade talks between the U.S. and China, the two largest economies in the world, are so important.

For the record, the market, at any time, can start making its way back up prior to any trade talk agreement.

But the longer the uncertainty festers, the harder it will be without something concrete.

Trading should be lighter this week given the shortened holiday (Thanksgiving) trading week.

But that could easily exacerbate what the market does in either direction.

Traders will be eying the lows we saw last week in the Dow and the S&P to see if they hold (even though the tech-heavy Nasdaq already took them out). If they hold, a rally is likely to develop. If those give way, the next level of support comes in at the pullback's October 29th lows.

See you tomorrow,

Kevin Matras

Executive Vice President, Zacks Investment Research


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