Stocks plunge as trade, tech worries drag prices down; Dow drops more than 450 points
Stocks plunge as trade, tech worries drag prices down; Dow drops more than 450 pointsCLOSE
The nine-year stretch of rising stock prices wonât last forever. So nowâs a good time for investors to bear-proof their 401(k)s before the next financial storm.
The stock market kicked off the second quarter with steep losses as trade worries and continued weakness in popular tech stocks sparked selling on Wall Street that pushed the broad market back into correction territory, the Nasdaq into the red for the year and the Dow down more than 450 points.
At the close, the Dow Jones industrial average trimmed an earlier loss of more than 750 points and finished down nearly 459 points, or 1.9%, to 23,644.19. The U.S. stock market is coming off its firs t quarter of negative returns since 2015.
Many of the same headwinds that have weighed on stocks in recent weeks dragged down prices again on the first trading day of April. Stocks are coming under pressure from worries over an escalating tariff fight with China and the persistent declines in the tech sector, which has been a key performance leader in the bull market and is widely owned by both big and small investors. Investors fear social media companies and other tech companies will come under increased regulation due to lapses in data privacy at Facebook.
The key pillars of the bull market â" free trade, tech stock leadership and record-low borrowing costs â" are being called into question.
"The market is repricing stocks accordingly," says Quincy Krosby, chief market strategist at Prudential Financial.
Wall Street will be watching if investors come in and buy stocks at lower prices, as they have throughout the 9-year-old bull market, says Ax el Merk, chief investment officer of Merk Investments.
"Will the buy-the-dip crowd come back or have we seen a change in investor attitude?" Merk said.
A steep sell-off in shares of big tech stocks, whose size is a key price driver of the broad, market-cap weighted S&P 500 index, was a major drag. Facebook, still under pressure due to its data privacy scandal, fell nearly 3% and is down nearly 20% from its Feb. 1 peak. Amazon, under fire again from President Trump via Twitter due to its big size and negative impact on mom-and-pop retailers, fell 5.2%. And Tesla, the electric-car marker on the defensive following a deadly accident involving its autonomous driving system, was down more than 5%.
"It's a continuation of recent trends," says Bill Hornbarger, chief investment officer at Moneta Group in Clayton, Mo.
Stocks, which had rallied sharply on President Trump's moves to cut taxes and reduce corporate red tape, are now com ing under pressure by policy moves from the White House that are less market-friendly, such as imposing restrictions on trade.
The Dow, which is now 11.2% below its Jan. 26 all-time high, fell deeper into correction territory.
The Standard & Poor's 500 index, which joined the Dow back in correction territory, fell 2.2%, and the tech-packed Nasdaq declined 2.7%, pushing it negative for the year.
The weakness in U.S. stocks comes on the eve of the corporate profit reporting season, which is expected to be strong. Companies in the S&P 500 are forecast to grow earnings at a nearly 19% clip, up from estimates of 12.2% on Jan. 1, according to earnings tracker Thomson Reuters.
Investors were also rattled by China announcing Monday that it is raising import tariffs on U.S. pork, apples and other products, a move that ratchets up trade-war talk between the world's two biggest economies.
"Today's action may be another 'Tariff Tan trum,' " says Doug Ramsey, chief investment officer of The Leuthold Group in Minneapolis. He also said that there is less money sloshing around the world to invest in stocks, which is also weighing on prices.
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