Bears slapped the U.S. stock indexes Thursday as Beijing threatened to retaliate if President Trump imposes tariffs on Chinese goods. But China’s envoy to the U.S. said China was prepared to lift barriers and offer changes “beyond expectations,” according to a report in the South China Morning Post.
Blue chips struggled. In the 30-component Dow Jones industrial average, 26 stocks fell and the remaining four had gains of less than 0.2%. The biggest losers were Caterpillar (CAT) and Boeing (BA), each off about 3.5%.
The stock market midsession Thursday looked at the situation and decided to go with the pessimistic side. The Nasdaq dropped 1.9%; the Dow Jones industrial average, 1.8%; and the S&P 500, 1.7%. The small cap Russell 2000 slid 1.2%.
Volume in the stock market today rose on both major exchanges.
Trump is expected to sign a memorandum at 12:30 p.m. ET targeting China’s trade practices.
The Nasdaq’s loss pulled it under its 50-day moving average line, a bad sign for the already-pressured uptrend. The S&P 500 and the Dow were already below their 50-day lines and dug a deeper hole Thursday.
Defensive stocks were the chief gainers. Grain groups, metal ores and electric utilities posted gains. Among IBD’s 197 industry groups, losers led winners by a more than 10-to-1 ratio.
IBD 50 Stumbles
In the IBD 50, a list of the best stocks in fundamentals and technicals, losers outnumbered winners by a more than 5-to-1 ratio. Two exceptions were health savings account manager HealthEquity (HQY), which rose more than 2%, and retail discount chain Five Below (FIVE), up 3.5%.
Five Below reported quarterly results after the market’s close Wednesday. The company edged above the consensus view on earnings and revenue. Five Below has 625 stores in 32 states, according to Wednesday’s press release.
Five Below, a Philadelphia-based chain, has been expanding to California. Management expects California to eventually become its biggest market.
A day after the Federal Reserve raised interest rates a quarter point, even stocks expected to benefit from higher interest rates took hits. The superregional bank group fell 1.7%, suggesting the good news on rates and a trimming of Dodd-Frank were baked into the bank-stock prices.
Another possible explanation is that Trump’s protectionism could spark a trade war and hurt the world economy. In that scenario, stocks would have no places to hide.
All 12 stocks in the superregional group fell. KeyCorp (KEY) led the downside with a 2.5% drop.
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