US stock indexes dropped to a 12-week low amid rising government Treasuries because of the continuing signs for recession on the bonds market, as the trade dispute between China and the US shows no signs of relief.
The broad index S&P 500 ended the trading session with a decline of 19.37 points, or 0.69%, to 2,783.02 points, which is the lowest level since March 11, 2010. The index fell below its 100-day simple moving average for the first time since February.
The blue-chip index Dow Jones Industrial Average lost 221.36 points to 25,126.41 points, while Nasdaq Composite fell by 0.8% to 7,547.31 points. During the session, Dow registered a drop by more than 400 points.
The recent market slide has wiped about 6% off the S&P 500 since it closed at record highs in late April. The Dow has declined five weeks in a row, its longest weekly slump since 2011.
The yields on 10-year bonds fell to 2.21% before recovering to 2.26%, which is still the lowest level since September 2017. The difference in yield between 3-month and 10-year government Treasuries, often seen as possible early warning of an on-going recession, has fallen to its lowest level since 2007 – minus 13 basis points. The investors will look more closely at the state of the US economy when a batch of new data appears on Thursday morning.
The CBOE Volatility Index, which measures the implied volatility of S&P 500 options, was up 2.29% to 17.90.
After months of over-optimism, the investors finally realized that it was impossible to achieve rapid success in the trade dispute between the US and China. The escalating the trade dispute is more likely than a short-term solution.
Earlier today, the Chinese Communist Party’s newspaper warned the US that the country was ready to use rare earth elements to repel the struggle against their fierce trade war. President Xi Jinping’s visit to a rare metals plant last week has sparked speculation that China will use its dominant position as a supplier of rare minerals for a lever in the war. China is the sourcing of 80% of the rare metals imports in the US between 2014 and 2017, which are excluded from the latest list of goods, which will be taxed at import.
At the same time, Huawei takes legal action against the US sanctions. China’s network equipment provider wants the restrictions imposed by US President Donald Trump to be declared unconstitutional.
Corporate stocks performance
The stocks of Abercrombie & Fitch declined by more than a quarter. The textile dealers disappointed investors with their data for weak quarterly sales. Thus, the fall of the stock market threatens to move into a new round. The recovery from the bottom of mid-November begins to melt.
The stocks of Boeing declined by 1.7% amid continuing 737 Max crisis. According to the IATA’s latest estimate, the flight ban will continue until August at least. The stocks of the aircraft manufacturer sank to the bottom of the blue-chip index Dow Jones.
Johnson & Johnson was also in the bottom of Dow Jones, recording a decline of 4.2% following a collapse in the whole sector.
The stocks of General Mills declined by about 6% after Goldman Sachs advised investors to sell the food producer’s stock.
the shares of Capri Holdings fell to 52-week lows, wiping out 9.85%, while the stocks of TuanChe even collapsed to an all-time low, declining by 20.00%.
The top performers on the S&P 500 were Chesapeake Energy Corporation (+10.31%), Range Resources Corp (+4.21%) and Helmerich and Payne Inc (+3.57%), while on the flip side were Capri Holdings Ltd (-9.85%), L Brands Inc (-7.06%) and PVH Corp (-6.28%).
Corporate stocks performance
The clothing retailer Tilly’s Inc reported Q1 EPS of 0.02 USD, which is in-line with the analyst estimate. The revenue for the quarter came in at 130.3 million USD versus the consensus estimate of 128.73 million USD. The company’s quarter-to-date comparable store net sales have decreased by 6.6% through Memorial Day weekend. Tilly’s Inc believes this slow start is largely attributable to unseasonable weather across much of the country, particularly in California where 95 of the company’s 228 total stores reside, resulting in weak sales results across almost all spring/summer product categories. The clothing retailer expects its second quarter total net sales to range from approximately 154 million USD to approximately 159 million USD based on a comparable store net sales decrease of 1% to 4% for the quarter as a whole.
Semtech came out with quarterly earnings of 0.34 USD per share, in line with the consensus estimate of the analysts. This compares to earnings of 0.47 USD per share a year ago. These figures are adjusted for non-recurring items. A quarter ago, it was expected that this chipmaker would post earnings of 0.54 USD per share when it actually produced earnings of 0.55 USD, delivering a surprise of 1.85%. Over the last four quarters, the company has surpassed consensus EPS estimates three times. Semtech posted revenues of 131.35 million USD for the quarter ended April 2019. This compares to year-ago revenues of 130.43 million УСД. The company has topped consensus revenue estimates four times over the last four quarters.