U.S. stocks kicked off September on a weak note Tuesday, with all major indexes finishing lower, as investors focused on latest developments on the trade front. But the market came off the session’s nadir near the end of the trading day.
How did major benchmarks fare?
The Dow Jones Industrial Average DJIA, -0.05% fell 12.34 points to 25,952.48, bouncing back from an intraday loss of around 158 points. The S&P 500 index SPX, -0.17% shed 4.80 points, or 0.2%, to 2,896.72 and the Nasdaq Composite Index COMP, -0.23% fell 18.29 points, or 0.2%, to 8,091.25.
Both the S&P and the Nasdaq are coming off their a fifth positive month in a row, while the Dow has gained for two straight months.
What drove the market?
Trade tensions were a key focus for investors, with the U.S. scheduled to restart tense negotiations with Canada that could lead to way to revising the North American Free Trade Agreement.
Over the weekend, President Donald Trump threatened to leave Canada out of any new Nafta pact. The president of the country’s largest group of labor unions said that Nafta won’t work if it doesn’t include Canada.
Those comments come after talks between the U.S. and its northern neighbor last week were halted with no agreement before an unofficial White House deadline of Friday. The U.S. Trade Representative’s office cited “progress” in talks that were “constructive.”
The materials sector, which has a high correlation to trade, was one of the weakest of the day, falling 0.8%.
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Trump sent a formal notice to Congress stating that he still intends to sign a revised version of Nafta by late November but over the weekend he urged lawmakers not to prevent a bilateral deal between Mexico and the U.S. from moving forward without Canada.
Which data were in focus?
The Institute for Supply Management’s manufacturing survey rose to 61.3 in August, its highest level since May 2004.
Separately, the IHS Markit reading on August manufacturing came in at 54.7, compared with 55.3 in July. A reading of more than 50 signals an expansion in activity.
Construction spending rose 0.1% in July.
What were analysts saying?
“Markets will continue to watch for additional trade news as usual,” said Bill Stone, chief investment officer at Stone Investment Partners. “Last week started with the positive news of a bilateral Nafta trade deal with Mexico. The week ended without a deal with Canada, but negotiations will continue this week. The U.S. also indicated that tariffs on an additional $200 billion in Chinese goods will begin this Thursday with China likely to retaliate in kind.”
”The key economic data point this week is the employment report on Friday. It should set the tone for the remainder of the month, from the Fed meeting to views on inflationary pressures and overall growth. The betting is more of the same, good numbers, good equity markets, and still growing economy,” said Paul Nolte, portfolio manager at Kingsview Asset Management, in his weekly outlook.
Robert Sluymer, technical strategist at Fundstrat Global Advisors, said the market may be headed for a pullback with short-term indicators suggesting that stocks are entering overbought territory.
Which stocks were in focus
Nike Inc. NKE, -3.16% fell 3.2% after it announced that its new ad campaign would feature Colin Kaepernick, the NFL quarterback who led player protests against racial injustice and police brutality by kneeling during the national anthem. The stock was one of the biggest drags on the Dow.
Amazon.com Inc. AMZN, +1.33% rose to an all-time high of $2,050.50 earlier in the session, briefly giving it a market capitalization above $1 trillion. It is the second U.S. stock to hit that threshold, after Apple Inc. AAPL, +0.32% did a month ago. The stock closed up 1.3%.
Transocean Ltd. RIG, -6.69% announced Tuesday an agreement to buy offshore drilling contractor Ocean Rig UDW Inc. ORIG, +11.96% in a cash and stock deal valued at $2.7 billion, including debt. Shares of Transocean fell 6.7%, while those for Ocean Rig surged 12%.
Facebook Inc. FB, -2.60% fell 2.6% after MoffettNathanson downgraded the stock of the social-media giant to neutral from buy.
Conn’s Inc. CONN, -13.17% shares sank 13% after the furniture-and-mattress retailer reported its second-quarter results.
Southwestern Energy Co. SWN, -4.98% fell 5% after it announced a deal to sell its Fayetteville Shale E&P and related midstream gathering assets for $1.87 billion in cash to Flywheel Energy LLC.
Nordstrom Inc. JWN, +3.45% gained 3.5% after Goldman Sachs started coverage on the department store with a buy rating and added it to its conviction list.
