US stocks have slumped as investors dumped shares of companies in growth and cyclical sectors, with energy and technology leading declines, on fears that the escalating US-China trade war will stymie global economic growth.
Further fuelling trade fears among investors, Beijing said Washington needs to correct its “wrong actions” for trade talks to continue after the US blacklisted Huawei Technology last week.
Among S&P 500 sectors, only utilities and real estate, both considered defensive areas, registered gains as investors moved to safe-haven assets such as Treasuries. Stocks pared losses in the last hour of trading, but Wall Street’s major indexes all ended more than 1 per cent lower on Thursday.
“It looks less and less like there will be a near-term resolution to the trade war, and the market is obviously spooked on that,” said Lamar Villere, partner and portfolio manager at Villere & Co in New Orleans.
Shares of S&P 500 technology and industrial companies, two sectors that have been bellwethers of trade sentiment, fell 1.7 per cent and 1.6 per cent, respectively. Shares of S&P 500 companies in the cyclical financial and energy sectors also tumbled, with the 3.1 per cent drop in energy shares leading losses among S&P 500 sectors.
A 5 per cent plunge in oil prices in response to a dampened outlook for demand impeded energy shares, while a drop in 10-year Treasury yields, which hit their lowest level since October 2017, held back financial shares.
Adding to the downbeat mood in markets, data from IHS Markit showed US manufacturing faltered in May, with new orders falling for the first time since August 2009.
“We’re going to see a drift lower until there’s a resolution of what’s happening with China,” said Jamie Cox, managing partner at Harris Financial Group in Richmond, Virginia.
“If you’re trading, it’s not a bad idea to put yourself on the sidelines and sit it out.”
The Dow Jones Industrial Average fell 286.14 points, or 1.11 per cent, to 25,490.47, the S&P 500 lost 34.03 points, or 1.19 per cent, to 2822.24 and the Nasdaq Composite dropped 122.56 points, or 1.58 per cent, to 7628.28.
Stocks succumbed to selling pressure in May after Washington and Beijing engaged in tit-for-tat tariffs and other retaliatory measures, with the S&P 500 on track to post its first monthly decline since the December sell-off.
Shares of NetApp tumbled 8.1 per cent, the biggest percentage drop on the S&P 500, after the data storage equipment maker forecast current-quarter profit and revenue below Wall Street estimates.
L Brands shares jumped 12.8 per cent after the owner of Victoria’s Secret and Bath & Body Works reported better-than-expected quarterly earnings.
Declining issues outnumbered advancing ones on the NYSE by a 3.26-to-1 ratio; on Nasdaq, a 3.84-to-1 ratio favoured decliners.
The S&P 500 posted 28 new 52-week highs and 27 new lows; the Nasdaq Composite recorded 22 new highs and 189 new lows.
Volume on US exchanges was 7.61 billion shares, compared to the 6.99 billion-share average for the full session over the last 20 trading days.