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Investor optimism sparked by a truce in the trade war between China and the U.S. proved short-lived.
A day after the market rallied on news of a 90-day delay in further tariff increases by the U.S. against China, President Trump reminded people on Twitter this morning that he was a "tariff man."
….I am a Tariff Man. When people or countries come in to raid the great wealth of our Nation, I want them to pay for the privilege of doing so. It will always be the best way to max out our economic power. We are right now taking in $billions in Tariffs. MAKE AMERICA RICH AGAIN
— Donald J. Trump (@realDonaldTrump) December 4, 2018
Stock prices fell sharply with the Dow Industrials index falling 799 points and all three major indexes down more than three percent. The Entrepreneur Index™ declined 3.76 percent and only two of 60 stocks in the index posted gains on the day.
Trade worries weren’t the only thing rattling the markets. Bond yields fell dramatically, as investors anticipate a slowing economy. The yield on the 5-year Treasury bond fell more than five basis points to 2.78 percent and is now below the 2-year bond yield. Meanwhile, the 10-year Treasury yield fell a staggering eight points to 2.91 percent and is just 12 basis points above the 2-year yield. Such yield curve inversions — when long-term interest rates fall below short-term — usually portend an economic slowdown, if not recession.
Cyclical and financial stocks were particularly hard hit today. The Dow Jones U.S. Banks index was down nearly five percent, and financial services firms were weak across the board. Banks, which typically borrow short-term to lend long-term, are hurt by yield curve inversions.
Capital One Financial was down 6.12 percent and investment bank Jefferies Financial Group fell 7.01 percent. Asset manager BlackRock Inc. was down 5.99 percent while competitor Franklin Resources was down 2.89 percent.
Fedex Corp, considered a good barometer of the U.S. economy, fell 6.3 percent. Investors may also have been spooked by a research note from Morgan Stanley analyst Ravi Shanker, who warned about the potential impact of Amazon.com on the delivery industry. Amazon continues to add planes to its own personal delivery fleet and has an air cargo hub in Kentucky that may eventually handle up to 100 planes.
Business services provider Cintas Corp. and homebuilder D.R. Horton were down 5.18 and 4.5 percent respectively. Retail stocks were also rocked by fears about the economy. Bed Bath & Beyond was down 6.97 percent percent, bringing its drop for the year to 44 percent. Walmart (-2.97 percent) and Costco Wholesale Group (-2.5 percent) had smaller declines.
The clothing retailers also gave back their gains and more from yesterday. Gap Inc. was down 4.44 percent, while Ralph Lauren fell 4.42 percent and L Brands was off 3.9 percent. Under Armour Inc. was down 2.73 percent.
Wynn Resorts and Estee Lauder Companies, two stocks that rose sharply yesterday on the trade news, also gave back their gains today. Wynn was down 7.83 percent — the biggest decline on the Entrepreneur Index™ today, while Estee Lauder fell 5.61 percent.
Technology stocks were weak across the board. The volatile shares of graphics chipmaker NVIDIA Corp. fell 7.6 percent. Other big losses in the tech sector included Amazon.com(-5.87 percent), Netflix (-5.16 percent) and Alphabet Inc. (-4.96 percent). Akamai Technologies had the smallest loss of the thirteen tech stocks on the index, falling 2.18 percent.
Only two stocks on the index had gains today. Tesla was up 0.34 percent and O’Reilly Auto Parts rose 0.03 percent.
The Entrepreneur Index™ collects the top 60 publicly traded companies founded and run by entrepreneurs. The entrepreneurial spirit is a valuable asset for any business, and this index recognizes its importance, no matter how much a company has grown. These inspirational businesses can be tracked in real time on Entrepreneur.com.
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December 4, 2018 at 05:31PM