Oil plunges 5% as stock markets tumble on trade, growth fears
Technology, among sectors most exposed to China, along with energy were the hardest hit
North American stocks slumped on Thursday as investors dumped shares of companies in growth and cyclical sectors, with energy and technology leading declines, on fears that the escalating U.S.-China trade war would stymie global economic growth.
Further fueling trade fears among investors, Beijing said that Washington needs to correct its "wrong actions" for trade talks to continue after the United States blacklisted Huawei Technology Co Ltd last week.
Among S&P 500 sectors, only utilities and real estate, both considered defensive areas, registered gains as investors moved to safe-haven assets such as Treasuries. Stocks pared losses in the last hour of trading, but Wall Street's major indexes all ended more than one per cent lower.
"It looks less and less like there will be a near-term resolution to the trade war, and the market is obviously spooked on that," said Lamar Villere, partner and portfolio manager at Villere & Co in New Orleans.
Shares of S&P 500 technology and industrial companies, two sectors that have been bellwethers of trade sentiment, fell 1.7 per cent and 1.6 per cent, respectively. Shares of S&P 500 companies in the cyclical financial and energy sectors also tumbled, with the 3.1 per cent drop in energy shares leading losses among S&P 500 sectors.
A five per cent plunge in oil prices in response to a dampened outlook for demand impeded energy shares, while a drop in 10-year Treasury yields, which hit their lowest level since October 2017, held back financial shares.
Adding to the downbeat mood in markets, data from IHS Markit showed U.S. manufacturing faltered in May, with new orders falling for the first time since August 2009.
"We're going to see a drift lower until there's a resolution of what's happening with China," said Jamie Cox, managing partner at Harris Financial Group in Richmond, Virginia. "If you're trading, it's not a bad idea to put yourself on the sidelines and sit it out."
The Dow Jones Industrial Average fell 286.14 points, or 1.1 per cent, to 25,490.47, the S&P 500 lost 34.03 points, or 1.2 per cent, to 2,822.24 and the Nasdaq composite dropped 122.56 points, or 1.6 per cent, to 7,628.28.
In Toronto, the benchmark S&P/TSX composite index fell one per cent to 16,164.61 points.
Stocks have succumbed to selling pressure in May after Washington and Beijing engaged in tit-for-tat tariffs and other retaliatory measures, with the S&P 500 on track to post its first monthly decline since the December sell-off.
Shares of NetApp Inc tumbled eight per cent, the second-biggest percentage drop on the S&P 500, after the data storage equipment maker forecast current-quarter profit and revenue below Wall Street estimates.
L Brands Inc shares jumped 13 per cent after the owner of Victoria's Secret and Bath & Body Works reported better-than-expected quarterly earnings.