Home Stocks Stock-market decline accelerates after big drop in home builder confidence

Stock-market decline accelerates after big drop in home builder confidence

12 min read

Stocks retreated Monday, extending a decline after a report showed home builder’s confidence plummeted in November, to kick off a holiday-shortened week on a down note.

U.S. financial markets will be closed Thursday for the Thanksgiving Day holiday.

How are benchmarks performing?

The Dow Jones Industrial Average

DJIA, -1.40%

tumbled 270 points, or 1.1%, to 25,142, the S&P 500 index retreated 30 points, or 1.1%, at 2,731, and the Nasdaq Composite Index

NQZ8, -2.59%

fell 144 points at 7,103, a decline of 2%.

Last week, the Dow posted a weekly decline of 2.2%, the S&P 500 index declined by 1.6%, while Nasdaq Composite Index shed 2.2%.

What’s driving the market?

Investor anxiety evidenced by last week’s declines continued Monday, following a report on home builder confidence that showed sector executives less confident than at any point in more than two years.

See: Home builder confidence tumbles the most since 2014 as headwinds catch up

Trade issues are another key driver of volatility, as investors consider the possibility that U.S. tariff rates on a swath Chinese goods could rise from 10% to 25% in January, as they will under current policy, absent a new agreement in the coming weeks. President Trump and Chinese President Xi Jinping will meet in Buenos Aires later this month, a summit investors hope will lead to a new trade deal, or at least the delay in tariff hikes.

Meanwhile, investors are also keying in on other political narratives, including Brexit and the Italian budget crisis, which could contribute to bouts of market volatility. Prime Minister Theresa May is slated to take her plan to take the U.K. out of the European Union to Brussels after seemingly avoiding a leadership challenge — at least for now.

Italian and EU officials remain in a protracted deadlock over the Italian government’s budget plans, which Brussels said run afoul of the bloc’s rules, setting up a clash between the two that could prove disruptive to markets.

Rising interest rates continue to be of concern for investors, as market participants seek to divine the pace of Federal Reserve interest-rate hikes in 2019 after next month’s meeting, where the FOMC is widely expected to raise the federal-funds rate by 25 basis points. A speech Monday by New York Fed chief John C. Williams will be watched by investors for any clues as to the thinking of the Fed’s monetary-policy committee.

What are strategists saying?

“This week, we’ll get a lot of new information about the housing market, which is one of the market’s biggest concerns, given its contribution to GDP growth,” Ryan Nauman, market strategist with Informa Financial Intelligence, told MarketWatch.

In addition to housing market data, investors will be paying close attention to Williams’s public appearances Monday, Ryan Nauman, market strategist at Informa Financial Intelligence, told MarketWatch.

“That could really move markets,” especially if he indicates that the Fed will aggressively raise rates next year. “Investors will be digging deep and reading between the lines of his words,” Nauman said.

Weakness in tech stocks is being driven by “soft guidance from semiconductor companies” like Nvidia and Texas Instruments, as well as troubling reports concerning demand for Apple’s latest iterations of the iPhone, Marc Pinto portfolio manager with Janus Henderson Investments, told MarketWatch.

“My sense is that negative sentiment is Apple-specific,” he said, but said that holiday shopping season numbers will help paint a broader picture of consumer demand for tech products.

Which stocks were in focus?

Netflix Inc.’s

NFLX, -4.44%

stock chart exhibited a bearish “death cross,” as the 50-day moving average for the first time since October 2016 falls beneath the 200-day. The stock is down 3.8% Monday.

Sonos Inc. shares

SONO, -11.92%

fell 10%, after company teased a new roster of its audio products.

Nissan Motor Co.

NSANY, -5.35%

7201, -0.45%

Chairman Carlos Ghosn was arrested Monday in Tokyo, Japanese media reported, and Nissan said it intended to oust Ghosn from his post after uncovering “significant acts” of financial misconduct. Shares of the company are down nearly 6% Monday morning. U.S.-traded shares of Nissan

NSANY, -5.35%

 fell 5.8%, while shares of Renault SA

RNO, -8.43%

 tumbled more than 9% in Paris. Ghosn is also chief executive of Renault and chairman of Mitsubishi Motors Corp.

Shares of Dow component Apple Inc.

AAPL, -3.63%

declined 2.8% and were in focus after The Wall Street Journal reported that the iPhone maker’s production woes are slamming suppliers. Last week, major iPhone suppliers including Qorvo Inc.

QRVO, -3.48%

Lumentum Holdings Inc.

LITE, -6.05%

and Japan Display Inc.

6740, -8.24%

JNNDF, -11.58%

lowered financial outlooks.

Climarex Energy Co. shares fell 1% after the company announced it would acquire Resolute Energy Co.

REN, +13.89%

in a deal valued at $1.6 billion. Resolute shares are up more than 13.5%.

Shares of Spectrum Brands Holdings Inc.

SPB, -21.80%

were down 17.8% after reporting a fourth-fiscal-quarter earnings and sales that missed their targets, combined with a downbeat 2019 outlook.

JD.com’s stock

JD, -4.30%

declined 6.4% after the Chinese retailer reported a third-quarter revenue miss Monday morning.

Take-Two Interactive Software Inc. shares

TTWO, -4.54%

were down 4.7% after a report in the New York Post suggesting that it could be part of a three-way merger, along with CBS Corp.

CBS, -3.17%

and Viacom Inc.

VIAB, -4.21%

What data are ahead

The National Association of Home Builder’s monthly confidence index fell 8 points to 60 in November, the largest decline in more than four years, and the lowest overall reading in more than two.

The New York Fed’s Williams will give a speech and participate in a moderated Q&A session Monday in New York, at 10:45 a.m. and 3:15 p.m. Eastern time, respectively.

How are other markets trading?

Stocks in Asia ended the trading day broadly higher, with the Nikkei

NIK, +0.65%

Hang Seng

HSI, +0.72%

and Shanghai Composite Index

SHCOMP, +0.91%

all advancing.

In Europe, stocks were also rising Monday, with the FTSE 100

UKX, -0.19%

up 0.4% and the Stoxx Europe 600

SXXP, -0.73%

up 0.1%.

Crude oil

CLZ8, -0.60%

continued its recent weakness, down 1.2% on Monday morning, with gold

GCZ8, +0.02%

 down 0.2%, and the U.S. dollar

DXY, -0.22%

down 0.1%.

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