The major U.S. indices lost ground this week, as the market appeared rattled by negative-sounding headlines related to trade and politics. The Dow Jones Industrial Average declined just 0.4%, but the S&P 500 (-1.0%), Nasdaq Composite (-2.2%), and Russell 2000 (-2.5%) posted sizable losses.
The market had two noticeable declines this week, with the first one coming on Tuesday as the market paid heed to the launch of an impeachment inquiry on President Trump. It seems unlikely at this point that anything material will transpire, but the political wrangling and uncertainty in how much this will affect trade negotiations weighed on sentiment.
Through all the ensuing political headlines, the market was still trending toward a relatively flat week on Friday. That was the case until headlines out of Bloomberg indicated that the White House was considering limiting U.S. investors’ portfolio flows into China and de-listing Chinese companies from U.S. stock exchanges. Granted, these were just headlines, but they clouded the outlook for a trade deal and threatened to upend the good will established by both countries ahead of trade talks in October.
The S&P 500 health care (-3.0%), energy (-2.6%), and communication services (-2.3%) sectors led the broader retreat. Many energy stocks were pressured by the continued decline in oil prices ($55.90/bbl, -$2.19, -3.8%) as supply concerns dissipated. The communication services sector was weighed down by shares of Facebook (FB), which lost nearly 7% amid recurring antitrust concerns.
The defensive-oriented consumer staples (+1.2%), utilities (+1.3%), and real estate (+0.2%) sectors were the lone sectors that finished higher. Demand for U.S. Treasuries wasn’t too noticeable, as yields only declined modestly this week. The 2-yr yield declined three basis points to 1.65%, and the 10-yr yield declined three basis points to 1.69%. The U.S. Dollar Index advanced 0.6% to 99.10.
This might have been due to an understanding that the U.S. economy remains in decent shape. For instance, weekly jobless claims remained at historically low levels (213,000); the annual pace of new home sales for August (713,000) was one of the highest readings since October 2007; pending home sales rebounded 1.6% in August; preliminary data showed encouraging manufacturing activity in the U.S. for September; and inflation pressure remained muted.
Still, it wasn’t a good week for the broader market, and it was arguably a terrible week for IPOs. Peloton (PTN) fell 11% in its first day of trading, which reportedly caused Endeavor Group to scrap its IPO one day before going public. The We Company (WE) postponed its IPO while Adam Neumann was pressured to step down as CEO.
Source: Briefing Investor