U.S. stocks fell sharply on Tuesday, reversing four-day winning run, owing to market concerns about a global economic slowdown. Conflicting news on trade war front also dented investors’ confidence. All three major stock indexes finished in the red.
The Dow Jones Industrial Average (DJI) closed at 24,404.48, declining 1.2% or 301.87 points. The S&P 500 Index (INX) decreased 1.4% to close at 2,632.90. Meanwhile, the Nasdaq Composite Index (IXIC) closed at 7,020.36, plunging 1.9%. A total of 7.97 billion shares were traded on Friday, lower than the last 20-session average of 8.24 billion shares. Decliners outnumbered advancers on the NYSE by 3.16-to-1 ratio. On the Nasdaq, decliners had an edge over advancers by 3.15-to-1 ratio. The CBOE VIX increased 16.9% to close at 20.80.
How Did the Benchmarks Perform?
The Dow ended in negative territory after a four-day winning streak. Notably, 26 stocks of the 30-stocks blue-chip index finished in the red while four ended in green. The tech-heavy Nasdaq Composite also ended in the red reversing its four-day wining streak, due to weak performance by FAANG stocks. Netflix Inc. NFLX , which carries a Zacks Rank #3 (Hold), declined 4.1%. You can see the complete list of today’s Zacks #1 Rank stocks here.
The S&P 500 closed in negative territory after gaining four straight days. The Energy Select Sector SPDR (XLE), Communication Services Select Sector SPDR (XLC) and Industrials Select Sector SPDR (XLI) are major losers with 2.2%, 2.1% and 2.1%, respectively. Notably, ten out of 11 sectors of the benchmark index closed in the red.
Concerns over Global Economic Slowdown
On Jan 21, The International Monetary Fund (IMF) reduced its global economic growth forecast for 2019 and 2020. The fund reduced its global growth projection for 2019 to 3.5% from 3.7% in October. Likewise, global growth projection for 2020 was reduced to 3.6% from 3.7% in October. This was the second time that IMF reduced its global growth projections over the last three months.
As per the fund, advanced economies are on a declining growth trajectory while the growth rate of emerging economies has slowed. Advanced economies are likely to grow by 2% in 2019 and 1.7% in 2010. Meanwhile, emerging economies are expected to grow by 4.6% in 2019 and 4.9% in 2020.
For the IMF, the ten-month old trade conflict between the United States and China is a major concern. The Chinese economy grew 6.6% in 2018, its slowest pace since 1990. Contagion effect of Chinese slowdown is likely to affect other emerging countries. Moreover, prolonged problem related to Brexit in the UK is another concern.
Conflicting News on Trade War Front
According to CNBC, the U.S. government has rejected a trade planning meeting with China scheduled to be held this week on the ground of gross disagreements over intellectual property rights. A major concern for the Trump administration is that China is stealing intellectual property from U.S. companies by unfair means.
This is the central point of trade conflict between the two largest trading countries of the world. Notably, the two countries are currently going through a 90-day truce period related to imposition of fresh tariffs on each other. The deadline will come to an end on Mar 1.
On Jan 22, The National Association of Realtors reported that existing home sales declined 6.4% to a seasonally adjusted annual rate of 4.99 million units in December. This was the lowest level since November 2015 and also below the consensus estimate of 5.22 million. However, existing home sales data for November was revised slightly upwardly to 5.33 million units from 5.32 million unites reported earlier.
EQT Corp. EQT released operational and capital expenditure forecasts for 2019. The company also outlined plan to lower costs and increase efficiency. ( Read More )
Zacks’ Top 10 Stocks for 2019
In addition to the stocks discussed above, wouldn’t you like to know about our 10 finest buy-and-holds for the year?
From more than 4,000 companies covered by the Zacks Rank, these 10 were picked by a process that consistently beats the market. Even during 2018 while the market dropped -5.2%, our Top 10s were up well into double-digits. And during bullish 2012 – 2017, they soared far above the market’s +126.3%, reaching +181.9%.
This year, the portfolio features a player that thrives on volatility, an AI comer, and a dynamic tech company that helps doctors deliver better patient outcomes at lower costs.
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