U.S. stock markets closed sharply lower on Wednesday following investor concerns that banks will face tighter regulations once Democrats take control of the House of Representatives. Moreover, precipitous fall of tech-behemoth Apple’s shares and conflicting news from trade front also made investors skeptical about investing in risky assets like equities. All three major stock indexes closed in the red.
The Dow Jones Industrial Average (DJI) closed at 25,080.50, shedding 0.8% or 205.99 points. The S&P 500 Index (INX) also declined 0.8% to close at 2,701.58. Meanwhile, the Nasdaq Composite Index (IXIC) closed at 7,136.39, dropping 0.9%. A total of 8.96 billion shares were traded on Wednesday, higher than the last 20-session average of 8.53 billion shares. Decliners outnumbered advancers on the NYSE by 1.54-to-1 ratio. On the Nasdaq, decliners had an edge over advancers by 1.93-to-1 ratio. The CBOE VIX increased 5.3% to close at 21.08.
How Did the Benchmarks Perform?
The Dow ended in negative territory for the fourth straight day, its longest losing streak since Aug 13. Notably, 23 components of the 30-stock blue-chip index closed in the red while 6 finished in the green and the remaining one was unchanged. The tech-laden Nasdaq Composite closed resumed its downward journey after a brief gap of yesterday when the tech-heavy index closed flat.
Meanwhile, the S&P 500 also closed in the red for fifth consecutive days. In broad-market index is in negative territory for the month so far. Financials Select Sector SPDR (XLF), Technology Select Sector SPDR (XLK) and Utility Select Sector SPDR (XLU) are major losers dropping 1.5%, 1.2% and 1%, respectively. Notably, ten out of total 11 sectors of the benchmark index closed in the red while one finished in the green.
Banking Stocks Plunge
On Nov 14, CNBC reported that Democrat Representative Maxine Waters stated that Trump administration policy of gradual deregulation of banking industry will come to an end once the new House of Representatives starts proceedings from January 2019. Maxine Waters is likely to become the Chairman of the powerful House Financial Services Committee in the new Congress.
Maxine Waters conveyed her concerns about the Federal Reserve’s efforts to reduce capital and liquidity requirements for banks. According to her, deregulation of banks is in fact raising the possibility of another financial crisis for the United States. Democrats will do what is needed to save the country from this severe risk.
On Nov 14, shares of Apple Inc. AAPL declined 2.8% marking its fifth straight day of losses. Notably, the tech-behemoth had entered bear market territory yesterday for a brief period. Although it finally recovered, the stock is still hovering around bear market territory. At present, shares of Apple are down 19.9% from its recent peak recorded in Oct 3. A drop of 20% or more from the Oct 3 price will put the stock in bear market territory.
Various component suppliers of Apple have reduced their sale guidance due to weak demand from the company. Several analysts have also reduced future sales prospects of iPhones. All these negatives intensified fears of a global economic slowdown, which dominated market sentiments from the beginning of this week. This was exacerbated by the crude oil price plunge, and these tailwinds together dragged down the whole technology sector.
Conflicting Statements on Trade Front
No concrete decision has come from the White House about possible trade negotiations with United States’ largest trading partner China. Notably, President Donald Trump and his Chinese counterpart Xi Jinping are slated to meet later this month at a G-20 summit in Buenos Aires, Argentina.
On Nov 14, Peter Navarro, Trump’s trade adviser, stated “globalist billionaires” are putting pressure on the White House to find arrive at an amicable trade solution with China. However, National Economic Council Director Larry Kudlow did not subscribe to this statement. The U.S. government has warned that it will levy tariffs worth $267 billion on China if the upcoming meeting between the two Presidents fails to arrive at any solution.
The Department of Labor reported that Consumer Price Index (CPI) for the month of October rose 0.3%, in line with the consensus estimate. The core CPI (excluding food and energy price) rose 0.2%, in line with the consensus estimate.
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