Wild comeback: Dow recovers from 785-point plunge

The evolving US-China trade war has launched the stock market on a wild roller coaster ride.News of t...

Posted: Dec 7, 2018 1:01 PM
Updated: Dec 7, 2018 1:01 PM

The evolving US-China trade war has launched the stock market on a wild roller coaster ride.

News of the arrest of Huawei CFO Meng Wanzhou in Canada sent the Dow plummeting as much as 785 points on Thursday before the index staged a huge comeback. The Dow closed the day down just 79 points.

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Trade wars

The Nasdaq eked out a small gain, recovering from trade war fears that had knocked the index down as much as 2.4%. The S&P 500 similarly rebounded, ending the day down just 0.2%.

The back-and-forth action shows how uncertain investors have become about the status of the US-China trade war. The market was also boosted by a report in The Wall Street Journal indicating the Federal Reserve is considering slowing down the pace of rate hikes next year.

"It's an encouraging sign that we closed significantly off the lows on a day that could have been in the record books for downdrafts," said Art Hogan, chief market strategist at B. Riley FBR.

While investors may be relieved at hints of a more cautious Fed, Hogan said that trade fears remain a major obstacle for the market.

"I don't think we fixed any of the things we were worried about," he said.

Huawei arrest sparks selling

The arrest of Meng sent shudders through global markets early in the day. Hong Kong's Hang Seng plunged 2.5% overnight, while European stock markets declined sharply as well. Germany's DAX nearly closed in a bear market, down nearly 20% from its January closing high.

Companies like Apple (AAPL) and Boeing (BA) that have significant exposure to China fell sharply before rebounding. Other trade-related stocks like Broadcom (AVGO) and Harley-Davidson (HOG) were also under pressure.

The arrest of Meng -- the daughter of the founder of one of China's most important companies -- serves as a fresh reminder that the United States and China remain in a trade war, despite the ceasefire reached last weekend in Argentina. Tariffs already imposed remain in place and new ones loom if talks fail to result in a breakthrough or at least an extension within 90 days.

Trade war fears

Renewed trade jitters, along with worries about an economic slowdown, sent the Dow plummeting 799 points on Tuesday. That selloff wiped out a chunk of last week's rally, which was the S&P 500's biggest weekly gain in seven years. US markets were closed on Wednesday in honor of President George H.W. Bush.

"The Huawei arrest just adds to concerns that this trade situation could deteriorate further," said Kristina Hooper, global market strategist at Invesco.

Hooper said investors have become more concerned about the US-China trade standoff because the negative impacts have become more apparent. Supply chains have been disrupted, raw material costs are on the rise and businesses may be delaying investment decisions.

"Almost none of us lived through the full-blown trade wars that erupted in the 1930s," Hooper said.

President Donald Trump spooked investors on Tuesday when he called himself a "Tariff Man" in a tweet. Trump also suggested tariffs will "MAKE AMERICA RICH AGAIN" -- even though these levies are paid by American companies and consumers.

Oil plunges again

Energy stocks retreated in tandem with plunging oil prices. Pioneer Natural Resources (PXD) and Baker Hughes (BHGE) slumped more than 3%. US oil prices tumbled 2.7% after OPEC and its allies concluded Thursday's meeting in Vienna without holding a press conference. Analysts had been anticipating a significant supply cut that would balance the market.

Saudi Arabia, the leader of OPEC, hinted that the reduction could be less than what analysts anticipated. Khalid Al Falih, the kingdom's energy minister, told reporters that a cut of 1.3 million barrels per day is "excessive."

Investors are also nervously watching a recession indicator in the bond market: the slope of the yield curve. The gap between the two-year and 10-year Treasury yield shrank this week to levels unseen since just before the Great Recession. An inversion -- where short-term rates are higher than long-term ones -- has been a reliable prognosticator of recessions in the past.

Concerns about the flattening yield curve weighed heavily on bank stocks. Bank of America (BAC), Citigroup (C) and Morgan Stanley (MS) all closed down on the day.

Minnesota Coronavirus Cases

Data is updated nightly.

Cases: 483790

Reported Deaths: 6543
CountyCasesDeaths
Hennepin1003791583
Ramsey42945800
Dakota36091387
Anoka33200384
Washington21986254
Stearns18703200
St. Louis14746262
Scott13209107
Wright12489115
Olmsted1176188
Sherburne869772
Carver765240
Clay688887
Rice667191
Blue Earth591035
Kandiyohi578474
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Chisago496844
Otter Tail481370
Benton444890
Winona416649
Mower402731
Douglas392268
Nobles386547
Goodhue384468
Polk342262
McLeod338349
Beltrami336751
Morrison323547
Lyon312444
Itasca311646
Becker309941
Isanti305354
Carlton299848
Steele299211
Pine281916
Freeborn279823
Nicollet256041
Todd246330
Brown243537
Le Sueur233920
Mille Lacs226747
Cass219124
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Meeker206934
Martin188228
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Pennington131816
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Watonwan11708
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Marshall77615
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Lincoln5052
Grant4908
Norman4768
Unassigned44568
Mahnomen4417
Kittson40821
Red Lake3625
Traverse3025
Lake of the Woods2161
Cook1180

Iowa Coronavirus Cases

Data is updated nightly.

Cases: 361499

Reported Deaths: 5412
CountyCasesDeaths
Polk58007549
Linn20606312
Scott18279207
Black Hawk16223290
Woodbury14924211
Johnson1380473
Dubuque13522194
Dallas1132690
Pottawattamie10762143
Story1018945
Warren553474
Clinton542484
Cerro Gordo532781
Webster517687
Marshall495572
Sioux493469
Buena Vista472736
Des Moines457061
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Wapello4314108
Jasper416266
Plymouth394277
Lee374752
Marion358469
Jones294354
Henry293037
Carroll285348
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Boone259130
Washington253747
Benton252054
Mahaska223846
Jackson221138
Dickinson217238
Tama212965
Kossuth208154
Clay193125
Hamilton191942
Delaware188639
Winneshiek188427
Buchanan184629
Fayette184335
Page182619
Hardin180839
Wright179531
Harrison179469
Cedar177023
Clayton168053
Butler165831
Mills162820
Floyd162740
Madison154018
Poweshiek153630
Cherokee153535
Hancock146729
Lyon145941
Allamakee144946
Iowa144223
Grundy138830
Appanoose138647
Jefferson138232
Winnebago137730
Calhoun133311
Cass133351
Mitchell130640
Louisa128341
Union126331
Chickasaw124813
Sac124218
Emmet120940
Shelby120433
Franklin118419
Humboldt117225
Guthrie116228
Palo Alto104921
Montgomery103936
Howard102821
Clarke100320
Unassigned9850
Keokuk97829
Monroe93128
Adair91928
Ida90832
Pocahontas85219
Davis82523
Monona81527
Greene76910
Lucas73221
Osceola70314
Worth6947
Taylor66312
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Decatur5749
Van Buren56018
Ringgold51820
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Tracking a cool start to the work week then a big warm-up!
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