Market Update: Stock-Rally Slams on Breaks Trade Fears Linger

U.S. stocks finished lower on Wednesday, with the Dow reversing a 285-point gain as trade tensions between the United States and China continued to undermine investor psyche.

Stock-Rally Falters

Wall Street traded firmly higher after the open, with the S&P 500 Index gaining as much as 0.8% before the rally faded around midday. The large-cap index closed down 0.9% at 2,669.63, with a majority of sectors finishing lower.

Dow industrials pivoted lower after a solid start to the day, with the index falling 165.52 points, or 0.7%, to 24,117.59.

The technology-heavy Nasdaq Composite Index was the biggest decliner percentage wise, falling 1.5% to 7,445.08.

A measure of implied volatility known as the CBOE VIX spiked for the second time in three days, reaching a high of 18.19. The so-called “fear index” settled at 18.15 for a gain of 12.1%.

Stocks rose initially amid signs that President Trump’s crackdown on Chinese technology investments would be less restrictive than initially thought. A senior Trump administration official said Wednesday that the government will look to the Committee on Foreign Investment in the United States to deal with foreign purchases of domestic technology products.

Oil Prices Hit Multi-Year Highs

Energy stocks outperformed the market by a wide margin as oil prices resumed their upward trajectory. The S&P 500’s energy index finished 1.3% higher after crude supplies notched their biggest weekly decline of the year.

U.S. West Texas Intermediate (WTI) peaked at $73.06 a barrel, its highest level on the New York Mercantile Exchange since November 2014. The benchmark settled at $72.30 a barrel, gaining $1.77, or 2.5%. Brent, the international futures benchmark, rose 92 centd or 1.2%, to $77.23.

Inventory data from the U.S. Energy Information Administration (EIA) showed a whopping 9.9 million-barrel drop in crude stockpiles last week. The massive draw-down points to heightened energy consumption at a time when global supplies are expected to face a shortfall.

Cryptocurrencies Under Pressure

Cryptocurrencies failed to secure a much-needed relief rally Wednesday, as prices continued to deteriorate. The total market reached a low of $242 billion, according to CoinMarketCap, before recovering around $248 billion. Prices were down slightly compared with the previous 24 hours.

Bitcoin continued to defend a key psychological support but upside was severely limited by a lack of new buyers in the market. The largest cryptocurrency by market cap continues to trade above $6,100.

EOS was the biggest gainer in the top-10 after the project’s founder recommended scrapping the current constitution in favor a plan that would better streamline the arbitration process. EOS prices rose 4.6% to $8.10.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Chief Editor to and Contributor to, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi