The Dow Jones endured a rough open to the trading week on Tuesday, falling just over 1% as the tech sector took a beating. Donald Trump’s increasingly hawkish anti-China rhetoric is a growing concern for the Dow’s bevy of China-centric corporations like Apple.
All three of the major U.S. stock market averages came under pressure as the Nasdaq dropped over 2%, the S&P 500 fell 1.6%. This left the Dow Jones as the top performer with its less severe 1% decline.
In the absence of much significant economic data, it was crude oil that was hotly in focus. Saudi Arabia, the world’s largest exporter of crude, cut its prices and slashed capital expenditure . This likely triggered today’s almost 8% plunge , taking the price per barrel further below the $40 handle, to $36.60.
Large drops in energy prices have proven to be extremely damaging to stock market sentiment this year, and the latest correction is also weighing on sentiment.
Curiously the pandemic is almost entirely absent from headlines with a gradual decline in U.S. cases not attracting the clicks they once did.
Another head-scratcher for Dow bulls came from the Senate, where Mitch McConnell is expecting to take a vote on another stimulus bill soon . Usually, such news would be a catalyst for buying on Wall Street, but a healthy dose of skepticism is being applied in this case. Nancy Pelosi’s Democrats are unlikely to agree to much, and McConnell has the equally unenviable task of trying to get a splintered Republican senate on board.
Until all of this conflict is resolved, it seems unlikely stocks will respond positively to the stimulus headlines like they once did.
Among the myriad of negative storylines being discussed was the U.S./China decoupling. The following statement from Donald Trump on Labor Day gave a hint as to what investors can expect should he be victorious in November, stating,
We will make America into the manufacturing superpower of the world and will end our reliance on China once and for all… Whether it’s decoupling, or putting in massive tariffs like I’ve been doing already, we will end our reliance on China, because we can’t rely on China.
Such a move is significant for many major stocks in the Dow Jones, such as Apple, Caterpillar, and NIKE, all of which have a substantial presence in China. As if confirming that the antagonism is real, Premier Xi talked of preparing for “external changes” in a speech in Beijing .
The Dow 30 came under heavy selling pressure on Tuesday, and bulls will be delighted that Apple is no longer so heavily weighted, as it plunged another 4% today. Although not in the Dow Jones, the bull market’s spiritual leader Tesla, took a 16% whack after it was not included in the S&P 500. The ripple of this is being felt throughout the tech sector, as Microsoft also fell, down 3.4%.
As seen in the video below, some people think the retail investors are losing their nerve:
Despite being mostly in the red, it was not all bad news in the Dow Jones as Disney stock enjoyed a tremendous 3% rally after a 68% surge in Disney+ subscriptions over the holiday weekend. This was driven by the release of its live-action version of the popular animated classic, Mulan.