The positive news for the Sino-American trade talks on Monday proved insufficient for further growth in the US stock market.
On the contrary, after an initial friendly start with a peak of 26,155 points, the NYSE blue-chip index Dow Jones Industrial Average dropped by more than 200 points, or 0.79%, to 25,819.65 points.
Both the broader index S&P 500 and the technology Nasdaq Composite, which had annual peaks earlier during the session, also saw significant declines. S&P reported a decrease of 0.4% to 2,793 points.
The Wall Street Journal reported on Sunday that the US and China are in the final stage of trade talks after months of fierce disputes. Beijing proposes to reduce tariffs and other restrictions on US goods while Washington is considering removing most, if not all, sanctions against Chinese products last year.
Recent statements by representatives of China and the United States suggest that resolving the customs dispute is getting more realistic. According to analysts, however, only statements of intent can no longer feed indexes to the highest level reached in November. The fact that positive news now follows price losses is evidence that the decision of the ongoing trade conflict between the two big economic powers has already been calculated on the stock market. Moreover, the market attributes the potential solution to the trade dispute, which in turn increases the potential for disappointment in the event of a failure of the negotiations.
Corporate stocks performance
The healthcare sector suffered heavy losses after negative media news for the industry. Shares of DaVita declined by 3.4%. A broker cites a media report that the Trump administration is working on a new payment approach for dialysis patients to increase the focus on cheap home treatment and transplantation.
Among the worst performers in Dow Jones was the pharmacy chain Walgreens, whose shares continued the downward trend since last Friday. On Monday, they lost 2.4% of their value. At the bottom of the Dow were shares of the UnitedHealth Health Insurance Group, which wiped out 4.4% of their value, as well as UnitedHealth Group, which is down by 4.14%.
By contrast, Coca-Cola shares rose by 0.64%.
Amazon’s investors enjoyed a growth of 1.3%. The online giant intends to open dozens of new supermarkets in several major US cities. The first site should begin work at the end of the year in the Los Angeles metropolis. The group is also considering buying local chains of supermarkets.
Tesla shares fell by 3.4%. The electric car manufacturer intends to present a new version of its SUV on March 14, which will be based on its Model 3. Tesla Model Y will be about 10% bigger and thus have a slightly smaller mileage than Model 3. On Friday, the company’s stock price declined by almost 8%.
Meanwhile, the mining company, Newmont Mining, has rejected an 18 billion USD takeover bid from its rival Barrick Gold. Instead, Newmont Barrick’s Board of Directors has proposed a cooperation between the two companies in the State of Nevada. Newmont shares rose by 0.6%, while Barrick’s stock added 0.9%.
Kraft Heinz shares rose by 2.5% after Morgan Stanley’s investment bank rose its Underweight rating to Equal Weight.
Corporate earnings reports
Russia’s second largest private company, Lukoil, reported an increase in its net profit by 48% in 2018 in the context of a recovery in oil prices. In 2018, Lukoil’s net profit reached 619.2 billion rubles (about 8.3 billion EUR at the current exchange rate), up by 48% YoY. The increase in earnings is mainly explained by rising fossil fuel prices and the weakening of the ruble. Revenue has risen by 35% to 8,035 trillion rubles (around 108 billion EUR). The gross operating profit (EBITDA) increased by 34% in 2018 to 1.145 trillion rubles (15.4 billion EUR). Lukoil has made large-scale investments in recent years to counteract the decline in its production, particularly in its old west Siberian reserves.