(MarketWatch) – U.S. stocks fell sharply at the start of trade Tuesday, extending a pre-Thanksgiving rout that has been fueled mostly by a selling in shares of technology and internet-related companies. Sharp declines in Target and Lowe’s after disappointing earnings also contributed to the tone.
U.S. financial markets will be closed Thursday for the Thanksgiving Day holiday and will be see an early close on Friday.
How are benchmarks performing?
The Dow Jones Industrial Average DJIA, -1.89% fell 484 points, or 1.9%, at 24,534, the S&P 500 index SPX, -1.44% was down 46 points, or 1.7%, at 2,645, while the Nasdaq Composite Index NQZ8, -2.04% was declining 153 points to 6877, a drop of about 2.1%. The drop erased year-to-date gains for all three major indexes.
On Monday, the tech-heavy Nasdaq Composite Index led the markets lower, closing down 219.4 points, or 3%, to 7,028.48. The Dow Jones Industrial Average tumbled 395.8 points, or 1.6%, to 25,017.44, and the S&P 500 index retreated 45.5 points, or 1.7%, at 2,690.73.
Monday’s losses resulted in the S&P 500 and the Dow’s worst start to a Thanksgiving week since 2011, while the Nasdaq registered its worst such start since 2000, according to Dow Jones Market Data.
What’s driving the market?
U.S. investors continue to be plagued by doubts surrounding slowing global growth, U.S.-China trade relations, and the steady rise in interest rates that can be expected to continue into next year. These doubts have accumulated to induce fears that we are growing nearer to the end of the current economic expansion, strategists say.
The previously highflying technology sector has the most to lose from this change in sentiment. Tech stocks extended a decline that led the market lower Monday, with reports from China adding fuel to the day’s selling after officials in Beijing uncovered widespread evidence of anticompetitive behavior by Korean rivals. According to The Wall Street Journal, Beijing investigators implicated Samsung Electronics 005930, -1.95% SK Hynix 000660, -3.30% and Micron TechnologyMU, -1.45%
Market participants believe that China’s investigation may intensify festering issues around trade relations between China and other major counterparts, including the U.S.
Meanwhile, Target Corp. TGT, -8.81% shares plunged toward a 6-month low in premarket Tuesday, after the discount retailer reported fiscal third-quarter earnings and same-store sales that missed expectations. The retailer’s loss also has the potential to drag down shares of its competitors.
What are strategists saying?
“Economic data remain strong, but the trend in the trend is deteriorating,” Peter Lazaroff, co-chief investment officer at Plancorp, told MarketWatch, arguing that the recent turn in sentiment is due to investors believing that we’ve already experienced the fastest rates of growth for both the U.S. economy and corporate earnings.
“Economic conditions are good, but the chances of economic conditions deteriorating over the next year or more is much higher than a surprise on the upside,” Lazaroff said.
At the same time, Lazaroff emphasized that volatility levels have merely returned to ordinary levels, whereas the low volatility that has characterized much of today’s bull market is the outlier. “This sort of price action is extremely normal,” he said. “What was strange was the outsized returns investors have earned in recent years with effectively no volatility.”
Which stocks are in focus?
Shares of Apple Inc. AAPL, -3.86% were down 3.3%, extending the previous session’s losses to a 4 ½-month low and threatening to leave the stock in bear-market territory, defined as a drop of at least 20% from a recent peak.
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Shares of Kulicke & Soffa Industries Inc. KLIC, +7.37% plummeted to a nearly 2-year low after the semiconductor equipment maker beat fiscal fourth-quarter earnings expectations, concerns about Apple production has weighed on chip makers. The stock is down more than 18% early Monday.
Lowe’s Cos.’s stock LOW, -2.65% is down 2.8%, after the home-improvement retailer reported fiscal third-quarter earnings that beat expectations but same-store sales that missed.
Target Corp. TGT, -8.81% stock is down nearly 9% at the start of trade Tuesday, after the firm announced Tuesday morning that fiscal third-quarter earnings and same-store sales missed Wall Street expectations.
Cambell Soup Co. CPB, +6.89% shares are rising 2.6% Tuesday morning, after a third-quarter earnings report that showed the firm beating earnings estimates, while the company affirmed its upbeat guidance for 2019.
Hormel Foods Corp. HRL, -3.17% stock has fallen more than 2.7% Tuesday morning, after missing revenue estimates in a Tuesday morning earnings report.
Shares of Kohl’s Corp. KSS, -10.10% are tumbling more than 9% early Tuesday, even after the firm beat Wall Street estimates for earnings and profit and raised its full-year 2018 guidance. Shares of the discount retailer are still up 30% year-to-date.
Shares of Analog Devices, Inc. ADI, +2.99% are on the rise at the start of trade, up 1.6% after beating analyst estimates for fiscal fourth quarter earnings and revenue in a Tuesday-morning earnings release.
What data are investors watching?
Housing starts came in at a 1.228 million seasonally adjusted annual rate in October, while permits came in at a 1.263 million rate. Investors are particularly focused on the housing market after a disappointing read in home builders’ confidence on Monday, which contributed to Monday’s decline.
