U.S. stocks sank to a 19-month low to close out their worst week since August 2011, with every sector losing ground and heavy selling in technology shares driving the Nasdaq indexes into a bear market. Treasuries edged higher.
Heavy volume sparked by the simultaneous expiration of futures and options lashed stocks that have been under pressure all week from concern over rising interest rates and the threat of slower global growth. Renewed personnel turmoil in the White House and the growing likelihood of a government shutdown added to investor anxiety before the holidays.
Dovish comments from a Fed official gave an early boost to the S&P 500, but renewed selling in some of the bull market’s biggest winners sent the index lower. It’s now down over 17 per cent from its record.
The Nasdaq indexes fared even worse, each sliding more than 2 per cent Friday to bring routs since summer records past 20 per cent. Every member of the FANG cohort lost more than 2.5 per cent, while Twitter plunged more than 6 per cent. The Cboe Volatility Index, known as the “fear gauge,” rose above 30 to hit a 10-month high. The dollar advanced as China signaled an easier monetary policy, and bonds retreated across Europe.
“It’s a convergence of various factors, from global growth, to quantitative tightening concerns, as well as political risk in the U.S. and across the globe,” said Chad Morganlander, portfolio manager at Washington Crossing Advisors. “It’s like ‘Wow, man.’ It’s unbelievable — it’s the polar opposite of what you had in 2017. Investors don’t necessarily need to dive into the pool until you see some of these various issues subside.”
The MSCI Asia Pacific Index dropped for the fourth session in six. The Stoxx Europe 600 Index finished little changed.
Treasuries rose, but European bonds fell ahead of the Christmas break. The dollar climbed against the yuan and most major currencies after China’s top policy makers said “significant” cuts to taxes and fees will be enacted in 2019, while signaling an easier monetary policy stance. The moves are the latest by leaders in world’s second-biggest economy as they grapple with a domestic slowdown and a trade war with America.
Elsewhere, orders placed with U.S. factories for business equipment fell in November, missing forecasts for an increase and adding to signs that demand is slowing amid risks from the trade war with China.
These are the main moves in markets:
The S&P 500 Index fell 2.1 per cent as of 4:01 p.m. New York time. The Stoxx Europe 600 Index gained less than 0.05 per cent. The U.K.’s FTSE 100 Index declined less than 0.05 per cent. Germany’s DAX Index rose 0.2 per cent. The MSCI Emerging Market Index fell 0.6 per cent.
The Bloomberg Dollar Spot Index rose 0.6 per cent. The euro declined 0.8 per cent to US$1.1358, the first retreat in a week. The British pound declined 0.3 per cent to US$1.2625. The Japanese yen fell less than 0.05 per cent to 111.33 per dollar.
The yield on 10-year Treasuries dipped two basis points to 2.78 percent. Germany’s 10-year yield increased two basis points to 0.25 per cent, the biggest climb in more than a week. Britain’s 10-year yield gained five basis points to 1.321 per cent, the highest in three weeks.
West Texas Intermediate crude fell 1.1 per cent to US$45.41 a barrel. Gold fell 0.4 per cent to US$1,255.45 an ounce.
–With assistance from Jeremy Herron, Adam Haigh and Samuel Potter.