S&P 500 just fell below its 200-day moving average, a warning of bigger drops to come
The fourth time proved to be too much.
The S&P 500 Index finally tumbled below its 200-day moving average, dragged down by tech troubles and tariffs. To chart watchers, the failure portends even bigger declines to come.
Investors can anticipate a slide of up to 5 per cent, Adam Turnquist, Piper Jaffray’s technical analyst, said last week. That would take the S&P 500 some 14 per cent below its January record.
The benchmark fell 2.35 per cent as of 11:45 a.m. in New York, its lowest since the frantic February sell-off that sent the index into a correction.
U.S. stocks tumbled to start the second quarter, as the weakness in technology shares worsened amid renewed presidential criticism of Amazon.com and retaliatory tariffs from China. Treasuries pared losses and gold rallied.
The Nasdaq 100 Index lost 2.9 per cent as investors continued to offload some of the bull market’s biggest gainers. Amazon and Netflix sank at least 6 per cent. The two had led the rally in the past year with gains of more than 50 per cent. Bonds erased declines and gold spiked higher as the equity selling picked up steam.
“This is definitely a flight to safety type of market,” said said Peter Jankovskis, co-chief investment officer at Oakbrook Investments. “You’re seeing people coming out of the stocks that had been performing well. There’d been various stories that momentum was extended in the market place, and I would say today’s activity supports that trying to unwind a bit.”
Investors are entering the second quarter on the defensive after the worst three months for global stocks in more than two years. February and March were characterized by a surge in volatility amid a barrage of concerns, from escalating trade tensions to a selloff in technology shares. Focus this week will turn to U.S. labor market data Friday, which is expected to show unemployment fall to its lowest level since 2000, while traders will also have one eye on trade developments.
“The U.S. markets will likely serve as a focal point as investors stateside and elsewhere consider what tact the administration will take toward trade in the weeks ahead and what effects it could have on the U.S. economy and the economies of its trading partners,” John Stoltzfus, the chief investment strategist of Oppenheimer & Co., wrote in a note to clients Monday.
Equities in Japan, China and South Korea declined during late Monday trading, reversing an earlier advance. Most European markets were closed for the Easter holiday. China on Monday to tariff treatment for more than 100 types of U.S. goods in reply to Trump’s ordering higher steel and aluminum import duties. Agricultural commodities and metals gained.
“The U.S. economy is showing a lot of symptoms of being late-cycle,” said Marc Chandler, global head of currency strategy at Brown Brothers Harriman & Co. “I’m looking for a downturn in maybe late next year or early 2020, with the fiscal stimulus they’re getting from the White House giving us a little bit of late-cycle expansion, but nothing that changes the game plan.”
These are the main moves in markets:
Stocks
The S&P 500 Index declined 2.2 per cent as of 11:56 a.m. New York time. The Nasdaq 100 was off 2.9 per cent and the Dow Jones Industrial Average fell 1.9 per cent. The MSCI Emerging Market Index increased 0.2 per cent.
Currencies
The Bloomberg Dollar Spot Index fell less than 0.05 per cent to 1,124.38. The euro climbed 0.1 per cent to US$1.2333. The British pound increased 0.3 per cent to US$1.4059, the first advance in a week.
Bonds
The yield on 10-year Treasuries advanced three basis points to 2.77 per cent, the biggest gain in a week. The yield on two-year Treasuries advanced two basis points to 2.28 per cent.
Commodities
Gold increased 0.7 per cent to US$1,334.57 an ounce, the biggest climb in more than a week. West Texas Intermediate crude dipped 0.8 per cent to US$64.42 a barrel. Corn climbed 0.8 per cent to US$3.91 a bushel, the highest in almost three weeks.