Markets finished lower on Friday as increasing worries of a trade war brewing between the United States and China led to a huge selloffs. Moreover, equities hit their session lows in the final two hours of trading after Fed Chairman Jerome Powell said that the U.S. central bank would keep increasing interest rates to curb inflation Further, U.S. nonfarm payrolls report on Friday showed an addition of fewer jobs in March, the lowest since the last Fall.
The Dow Jones Industrial Average (DJI) declined 2.3%, to close at 23,932.76. The S&P 500 fell 2.2% to close at 2,604.47. The Nasdaq Composite Index closed at 6915.11, shedding 2.3%. The CBOE VIX surged almost 13.5%. A total of 7.2 billion shares were traded on Friday, lower than the last 20-session average of 7.3 billion shares. Decliners outnumbered advancers on the NYSE by a 3.77-to-1 ratio. On Nasdaq, a 3.59-to-1 ratio favored declining issues.
How did the Benchmark Perform?
The Dow declined 572.46 points on growing fears of a trade war with China, entering correction territory once again. Losses for the Dow were also buoyed by a decline in the shares of Boeing (BA - Free Report) and Caterpillar (CAT - Free Report) , which fell 3.1% and 3.5%, respectively. Boeing has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The S&P 500 declined 58.37 points to close in the red, with industrials taking a major hit. More than 95% of S&P 500 stocks ended in the red, with all of the 11 major segments of the S&P 500 closed in the red. Industrial Select Sector SPDR ETF (XLI) and Financial Select Sector SPDR ETF (XLF) declined 2.8% and 2.4%, respectively.
Meanwhile, the tech-heavy Nasdaq fell 161.44 points, weighed down by tech majors such as Amazon.com, Inc (AMZN - Free Report) , Netflix, Inc. (NFLX - Free Report) and Apple Inc (AAPL - Free Report) .
Brewing Tensions of U.S.-China Trade War
The now familiar trade war related tensions between China and the United States heightened this week after China announced fresh tariffs on as many as 106 U.S. products. In retaliation, President Donald Trump threatened to impose $100 billion in additional tariffs on Chinese goods on Thursday.
Trump stated that he had asked the United States Trade Representative to start considering these tariffs. On Friday, China’s commerce ministry announced that it would not hesitate to react with retaliatory measures to the new tariffs from the United States.
Markets further declined after Treasury Secretary Steven Mnuchin said that there existed a chance of a possible U.S.-China trade war.
Further, bluechip companies, which depend on China for a major portion of their revenues too suffered on fears of a trade war.
Powell Indicates More Rate Hikes
Markets declined to session lows in the afternoon after Fed Chairman Jerome Powell stated that the U.S. Central Bank will likely continue increasing interest rates in order to keep inflation under control. Some traders were already anticipating that Powell would be acknowledging that the recent trade dispute has made markets volatile. However, he said that it was too early to understand if the growing trade tensions would hit the U.S. economy.
Job Additions the Lowest In Six Months
Per the U.S. nonfarm payrolls report on Friday, there has been an addition of only 103,000 jobs in March, which came in below the consensus estimate of 193,000. This is also below the previous month figure of 326,000.
In fact, the U.S economy created the fewest jobs in the last six months. However, March saw a 0.3% increase in monthly wage growth, pushing the annual wage growth rate from 2.6% to 2.7%.
All the three major benchmarks declined over the week as volatile trading session persisted. The Dow tanked 0.7%, on escalating trade war related tensions between U.S. and China. Also, S&P 500 and Nasdaq dropped 1.4% and 2.1%, respectively.
The volatile week started on a low as China announced tariffs of $3 billion on U.S. goods including pork, apples, dry fruits and a number of other agricultural produces.
Markets gained traction after White House gave an indication that the U.S. government would not want to enter into a trade war with China.
Notably, Thursday was also the first day on NYSE since March 2013 when new 52-week highs outnumbered 52-week lows. Powell’s statement that the U.S. bank would keep increasing interest rates to keep inflation in control once again made investors jittery.
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