Stocks retreated Monday, extending a decline after a report showed home builder’s confidence plummeted in November, to kick off a holiday-shortened week on a down note.
U.S. financial markets will be closed Thursday for the Thanksgiving Day holiday.
How are benchmarks performing?
The Dow Jones Industrial Average DJIA, -1.80% tumbled 455 points, or 1.8%, to 24,953, the S&P 500 index SPX, -1.80% retreated 49 points, or 1.8%, at 2,687, and the Nasdaq Composite Index COMP, -2.78% fell 205 points at 7,045, a decline of 2.8%.
Last week, the Dow posted a weekly decline of 2.2%, the S&P 500 index declined by 1.6%, while the Nasdaq shed 2.2%.
What’s driving the market?
Investor anxiety evidenced by last week’s declines continued Monday, following a report on home builder confidence that showed sector executives less upbeat than at any point in more than two years.
See: Home builder confidence tumbles the most since 2014 as headwinds catch up
Trade issues have been a key driver of volatility, as investors consider the possibility that U.S. tariff rates on a swath of Chinese goods could rise from 10% to 25% in January, as they will under current policy, absent a resolution. President Trump and Chinese President Xi Jinping will meet in Buenos Aires later this month, a summit investors hope will lead to a new trade deal, or at least the delay in tariff hikes.
Meanwhile, investors are also keying in on other political narratives, including Brexit and the Italian budget crisis, which could contribute to bouts of market volatility. Prime Minister Theresa May is slated to take her plan to take the U.K. out of the European Union to Brussels after seemingly avoiding a leadership challenge—at least for now.
Italian and EU officials remain in a protracted deadlock over the Italian government’s budget plans, which Brussels said run afoul of the bloc’s rules, setting up a clash between the two that could prove disruptive to markets.
Rising interest rates continue to be of concern for investors, as market participants seek to divine the pace of Federal Reserve interest-rate hikes in 2019 after next month’s meeting, where the FOMC is widely expected to raise the federal-funds rate by 25 basis points. A speech Monday by New York Fed chief John C. Williams will be watched by investors for any clues as to the thinking of the Fed’s monetary-policy committee.
What are strategists saying?
“Today’s housing data was pretty bad,” Jim Smigiel, chief investment office of Absolute Return Strategies, told MarketWatch.
He attributed falling home builder confidence to rising interest rates, which has dampened demand for new homes. At the same time, he doesn’t see falling confidence as predicting a broad downturn in the housing industry. “We’re in an adjustment period, where consumers are getting used to higher interest rates,” he said. “Other factors, like rising wages, low unemployment and demographic factors will help stabilize sentiment towards the housing sector,” in the coming months, he said.
In addition to housing market data, investors will be paying close attention to Williams’s public appearances Monday, Ryan Nauman, market strategist at Informa Financial Intelligence, told MarketWatch.
“That could really move markets,” especially if he indicates that the Fed will aggressively raise rates next year. “Investors will be digging deep and reading between the lines of his words,” Nauman said.
Weakness in tech stocks is being driven by “soft guidance from semiconductor companies” like Nvidia and Texas Instruments, as well as troubling reports concerning demand for Apple’s latest iterations of the iPhone, Marc Pinto portfolio manager with Janus Henderson Investments, told MarketWatch.
“My sense is that negative sentiment is Apple-specific,” he said, but said that holiday shopping season numbers will help paint a broader picture of consumer demand for tech products.
Which stocks were in focus?
Netflix Inc.’s NFLX, -4.79% stock chart exhibited a bearish “death cross,” as the 50-day moving average for the first time since October 2016 falls beneath the 200-day. The stock is down 4.4% Monday.
Sonos Inc. shares SONO, -12.50% fell 11.3%, after company teased a new roster of its audio products.
Nissan Motor Co. NSANY, -5.57% 7201, -0.45% Chairman Carlos Ghosn was arrested Monday in Tokyo, Japanese media reported, and Nissan said it intended to oust Ghosn from his post after uncovering “significant acts” of financial misconduct. Shares of the company are down nearly 6% Monday morning. U.S.-traded shares of Nissan NSANY, -5.57% fell 4.6%, while shares of Renault SA RNO, -8.43% tumbled 8.6% in Paris. Ghosn is also chief executive of Renault and chairman of Mitsubishi Motors Corp.
Shares of Dow component Apple Inc. AAPL, -3.77% declined 3.5% and were in focus after The Wall Street Journal reported that the iPhone maker’s production woes are slamming suppliers. Last week, major iPhone suppliers including Qorvo Inc. QRVO, -3.56% Lumentum Holdings Inc. LITE, -6.09% and Japan Display Inc. 6740, -8.24% JNNDF, -11.58% lowered financial outlooks.
Climarex Energy Co. shares fell 0.5% after the company announced it would acquire Resolute Energy Co. REN, +16.60% in a deal valued at $1.6 billion. Resolute shares are up more than 14%.
Shares of Spectrum Brands Holdings Inc. SPB, -21.46% were down 21.3% after reporting a fourth-fiscal-quarter earnings and sales that missed their targets, combined with a downbeat 2019 outlook.
JD.com’s stock JD, -3.06% declined 3.9% after the Chinese retailer reported a third-quarter revenue miss Monday morning.
Take-Two Interactive Software Inc. shares TTWO, -4.50% were down 4.3% after a report in the New York Post suggesting that it could be part of a three-way merger, along with CBS Corp. CBS, -3.48% and Viacom Inc. VIAB, -4.40%
What data are ahead
The National Association of Home Builder's monthly confidence index fell 8 points to 60 in November, the largest decline in more than four years, and the lowest overall reading in more than two.
The New York Fed’s Williams will give a speech and participate in a moderated Q&A session Monday in New York, at 10:45 a.m. and 3:15 p.m. Eastern time, respectively.
How are other markets trading?
Stocks in Asia ended the trading day broadly higher, with the Nikkei NIK, +0.65% Hang Seng Index HSI, +0.72% and Shanghai Composite Index SHCOMP, +0.91% all advancing.
In Europe, stocks closed the session lower as stocks in the U.S., with the FTSE 100 UKX, -0.19% retreating 0.2% and the Stoxx Europe 600 SXXP, -0.73% down 0.7%.
Crude oil CLZ8, +0.27% continued its recent bout of weakness, down 0.6% Monday, with gold GCZ8, -0.03% virtually unchanged and the U.S. dollar DXY, -0.19% down 0.3%.
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