Market Update: Dow’s Slide Hits Eight Days as Trade Risks Reemerge
U.S. stocks retreated Thursday, with the Dow Jones Industrial Average extending its losing skid to eight days as uncertainty over international trade undermined risk appetite.
Stocks Turn Defensive
Dow industrials were off 196.10 points, or 0.8%, by the close to settle at 24,461.70. That was the index’s worst settlement in three weeks.
The Dow’s losing skid is now the longest since March 2017. Another fall on Friday would bring the skid to nine days, the longest since 1978.
The broader S&P 500 Index fell 0.6% to close at 2,749.76. Seven of 11 primary sectors fell, led by energy and other commodity-sensitive sectors.
Meanwhile, the Nasdaq Composite Index closed down 0.9% at 7,712.95. The technology-heavy average closed in record territory on Wednesday.
Investor fear over a U.S.-China trade rift returned on Thursday, sending the VIX Volatility Index sharply higher. Wall Street’s gauge of investor anxiety climbed to a session high of 15.18 on a scale of 1-100 where 20 represents the historic average. The index would later settle at 14.68 for a gain of more than 14%.
Trade War Looms Large Over Market
U.S.-China trade tensions were back in focus Thursday after U.S. policymakers urged Google to end its business ties with Huawei, a leading Chinese smartphone maker. Congress recently banned U.S. firms from selling products to Chinese telecommunication giant ZTE, a move that practically shuts down the company.
Under President Trump’s orders, Washington announced last Friday it would implement a 25% tariff on up to $50 billion of Chinese goods, including semiconductors. Trump says additional tariffs of 10% will be applied on $200 billion of Chinese goods should Beijing choose to retaliate.
The first round of tariffs will come into force July 6.
In theory, tariffs will make American-made goods cheaper than imported ones, thereby encouraging consumers to purchase from local producers. Importers themselves will have to pay an additional tax on certain Chinese products they bring into the country – costs that are passed on to the consumer.
Saudi Arabia Proposes Crude Output Hike Ahead of OPEC Meeting
Saudi Arabia, OPEC’s de facto head, is encouraging fellow producers to support a deal that would see oil production rise by one million barrels per day. However, Iran remains the key holdout in the deal, with the country’s energy minister suggesting that a compromise is unlikely before the cartel meets Friday.
Despite Iran’s opposition, the biannual meeting in Vienna is expected to result in the first coordinated output hike since the cartel decided to constrain supplies all the way back in 2016.
The Saudis are banking on a slowdown in U.S. shale production over the next two years until pipeline bottlenecks are solved in the energy-rich Permian Basin, energy minister Khalid al-Falih said Thursday.
International crude prices declined sharply on Thursday, with Brent futures reaching a session low of $72.94 a barrel on London’s ICE Futures exchange. The global benchmark was last down $1.57, or 2.1%, at $73.17 a barrel.
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