NEW YORK (BLOOMBERG) - US stocks fell heavily on Monday (Oct 29), with the S&P 500 flirting with a correction as technology shares tumbled, after a report the Trump administration was set to press its trade war with China. The US dollar rallied.
The S&P 500 fell as much as 11 per cent from its all-time high before paring the drop in the final 15 minutes of trading. The Dow Jones Industrial Average slid more than 500 points at its worst, dipping into a correction before closing down 1 per cent. The Nasdaq 100 Index tumbled to the lowest level since May. The S&P 500 and Nasdaq indexes are on track for the steepest monthly declines of the record-long bull market.
Selling intensified after Bloomberg reported the US is preparing to announce by early December tariffs on all remaining Chinese imports if talks next month between presidents Donald Trump and Xi Jinping fail to ease the trade war. That stoked anxiety in markets already under pressure by concerns from peak earnings growth to the end of easy money and rising rates.
The S&P 500 Index fell 0.7 per cent at 4pm New York time. The Nasdaq 100 lost 2 per cent and the Dow Jones Industrial Average sank 1 per cent.
More than US$8 trillion has been wiped off of global equities during a rout that's now a month old. Bulls remain on the back foot, with early gains Monday fueled by speculation stocks had gotten cheap during the sell-off wiped out in afternoon trading.
"There's this pessimism that has been hanging on this market the whole month," Chris Zaccarelli, chief investment officer at the Independent Advisor Alliance, said by phone . "A trade war with China was one of the bigger overhangs. Any reminders of that just leads to more pessimism. Out of all the fears out there, that's the one sticking most in peoples' minds in terms of a reluctance to believe the economy is going to continue to be strong."
American investors will now turn to earnings this week from tech giants Facebook and Apple, along with the October jobs report on Friday. Earnings have not been able to save other megacap tech names. Amazon plunged 6 per cent Monday, Netflix lost 5 per cent and Microsoft gave up 2.9 per cent. Boeing led declines in the Dow, with a plunge of almost 6.6 per cent. IBM fell 4.1 per cent after agreeing to buy Red Hat.
"There's a not-so-faint scent of desperation," said Christopher Harvey, head of equity strategy at Wells Fargo. "No catalysts left, Fed action will doom the market, trade will only get worse."
Elsewhere, there were a host of developments hitting specific markets. Brazilian assets rose after Jair Bolsonaro swept to power. The euro fell as Germany's Angela Merkel said she will quit as head of her party after nearly two decades, though she intends to see out her term as chancellor. Mexico's peso was under pressure after the incoming president canceled airport construction. The pound fell as UK Chancellor of the Exchequer Philip Hammond delivered the country's budget.
The Stoxx Europe 600 Index surged 1.3 per cent to the highest in a week. Brazil's Ibovespa Index rose 2.1 per cent.
The Bloomberg Dollar Spot Index increased 0.6 per cent to the highest in about 17 months. The euro was flat at US$1.1392.
The Japanese yen fell 0.4 per cent to 112.34 per dollar, the biggest dip in almost two weeks.
West Texas Intermediate crude decreased 0.2 per cent to US$67.47 a barrel.
Gold fell 0.1 per cent to US$1,231.51 an ounce, the biggest fall in a week.