U.S. stock market closed mostly lower on Thursday as softness in tech sector, trade war concerns and fear of contagion from some emerging markets problems have rattled investor confidence. Both S&P 500 and Nasdaq Composite closed in the red while the Dow managed to finish in the green.
The Dow Jones Industrial Average (DJI) closed at 25,995.87, gaining 0.1%. However, the S&P 500 Index (INX) was down 0.4% to close at 2,878.05. The Nasdaq Composite Index (IXIC) closed at 7,922.73, decreasing 0.9%. A total of 6.66 billion shares were traded on Thursday, higher than the last 20-session average of 6.18 billion shares. Decliners outnumbered advancers on the NYSE by 1.49-to-1 ratio. On the Nasdaq, decliners had an edge over advancers by 1.89-to-1 ratio. The CBOE VIX increased 5.3% to close at 14.65.
How Did the Benchmarks Perform?
The Dow closed in positive territory for the second straight day with 17 components of the 30-stock blue-chip index closed in the green while 13 finished in the red. The tech-heavy Nasdaq Composite declined for the third-straight day led by stiff decline of the share prices of large-cap tech stocks.
The S&P 500 continued to suffer loses for the third straight day led by a decline of 1.8% in Energy Select Sector SPDR (XLE) and 0.7% drop in both Communication Services Select Sector SPDR (XLC) and Technology Select Sector SPDR (XLK). Notably, 6 out of 11 sectors of the benchmark index finished in the red while five ended in the red.
Softness in Tech Sector Continues
Large-cap tech stocks, especially Internet-based stocks continued to decline sharply for the second-straight day due to market concern about increased regulation on social media and Internet-based companies in order to check spreading misinformation and intervene in U.S. elections.
Consequently, the share price of Facebook Inc. (FB - Free Report) , Twitter Inc. (TWTR - Free Report) and Alphabet Inc. (GOOGL - Free Report) were down 2.8%, 5.9% and 1.3%, respectively. Alphabet and Twitter carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Trade War Concerns Loom Large
On Aug 30, Bloomberg reported that President Trump is moving ahead with fresh tariffs worth $200 billion to be imposed on a vast array of Chinese goods ranging from selfie sticks to semiconductors. The time line for submitting comments from companies and members of the public ended on Sep. 6. Trump is considering levying next round of tariffs by the end of this week. The two sides have already imposed $50 billion tariffs on each other.
United States and Canada are yet to reach a bilateral trade agreement in order to replace the old NAFTA. Trump has already threatened to eliminate Canada from the new NAFTA pact although he still stands by his previously stated time frame of late November to form a new deal with Canada in order to replace NAFTA.
Fear of Emerging Market Contagion
The ongoing economic crisis in some emerging markets especially severe currency depreciation in Argentina and Turkey may spill-over their peers. Many emerging markets such as Brazil, India, Indonesia, Turkey and South Africa are characterized as high current account deficit. Weak commodity prices and likelihood of a slowdown in the Chinese economy are other reasons of emerging markets volatility.
The labor Department reported that U.S. initial claims for state unemployment benefits decreased 10,000 to a seasonally adjusted 203,000 for the week ended Sep. 1. This figure was the lowest since December 1969 and also below the consensus estimate of 213,000.
The labor department also reiterated its earlier report that U.S. labor productivity grew at an annual rate of 2.9% in the second quarter of 2018. However, decline in unit labor cost revised to 1% instead of 0.9% reported earlier.
The Institute of Supply Management (ISM) reported that services sector index for the month of August was 58.5 compared with 55.7 in July. The consensus estimate was 56.3. Any reading above 50 indicates expansion of services sector.
The Commerce Department showed that U.S. factory orders for July dropped 0.8% compared with an increase of 0.7% in June. The consensus estimate was a decline of 0.5%.
According to ADP and Moody's Analytics, U.S. private companies added 163,000 jobs in August.
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