U.S. stock futures tumbled Thursday, with selling so intense at one point that circuit breakers were triggered, after the arrest of a Huawei executive reignited trade worries that helped drag equities to their worst session since early October on Tuesday.
The market was closed Wednesday to mark a national day of mourning for former President George H.W. Bush, who died Friday at 94.
How are the benchmarks trading?
Futures for the Dow Jones Industrial Average
were down 396 points, or 1.6%, at 24,649, though they were off overnight lows, when Dow futures fell as much 487 points, before recovering some of those losses before the bell Thursday.
On Tuesday, the Dow
sank 799.36 points, or 3.1%, to 25,027.07, while the S&P 500 index
dropped 90.31 points, or 3.2%, to 2,700.06. The Nasdaq Composite Index
tumbled 283.09 points, or 3.8%, to 7,158.43. All three benchmarks had their worst day since Oct. 10.
What’s driving the market?
While regular trading was closed Wednesday, there was a shortened session of electronic trading for stock-index futures that showed Dow futures bouncing 100 points. When futures reopened Thursday, the drop was so severe on S&P 500 futures that the Chicago Mercantile Exchange triggered circuit breakers to avoid worse losses. Those futures spiked down to 2,659, a drop of 1.9% before the CME stopped trading briefly to try to calm the market, said Chris Weston, head of research at Pepperstone.
Investors were rattled by news that the Canadian authorities had arrested Meng Wanzhou, the chief financial officer of Huawei Technologies, at the request of U.S. authorities for allegedly violating sanctions against Iran. The arrest, which was made on Dec. 1, comes as the U.S. has taken several steps to restrict the Chinese technology giant, trying to persuade international allies to do the same.
China authorities reacted furiously, with the spokesperson of the Chinese Embassy in Canada demanding the release of the Huawei executive. “At the request of the U.S. side, the Canadian side arrested a Chinese citizen not violating any American or Canadian law,” said a statement on its website. Huawei itself said it was “unaware of any wrongdoing by Ms. Meng,” in a statement released on Twitter.
The latest development comes amid an already shaky backdrop for trade relations between the U.S. and China. Doubts surrounding the weekend trade moratorium at the G-20 summit between the two sides and ominous developments in the bond market drove sharp losses for stocks Tuesday.
Market participants are also paying close attention to a Dec. 5-6 meeting of the Organization of the Petroleum Exporting Countries in Vienna. Crude-oil prices renewed their descent after the Saudi energy minister proposed a smaller-than-expected cut to production, but added that the oil cartel hadn’t yet agreed to any production declines.
The recent 30% drop in oil prices from their October highs is being interpreted by some market participants as a sign of slowing global growth, given oil’s central role as an input for a range of economic activity.
What data and speeches are in focus?
Investors are also facing a heavy load of economic data Thursday:
- At 8:15 a.m. ET, payroll firm ADP will release its estimate of private sector job growth in November.
- AT 8:30, the Labor Department will issue its estimate of the number of Americans who newly applied for unemployment benefits in November.
- At the same time, the government will release on third-quarter productivity growth and labor costs, two important metrics that inform the Federal Reserve’s understanding of the labor market and the path of future inflation.
- At 10 a.m. ET, the Institute of Supply Management will issue its gauge of services sector.
- At the same time, the Commerce Department will issue its report on manufacturers shipments, inventories and factory orders.
- At 12.15 a.m. Atlanta Fed Chief and FOMC member Raphael Bostic will give a speech on the U.S. economic outlook.
What are the strategists saying?
“The timing of the arrest is key here. Markets are already incredibly nervous over slowing economic growth thanks to the inverted U.S. yield curve. Relations between the U.S. and China were supposed to be on the mend after a productive G-20. However, the arrest has the potential to shatter very fragile U.S.—Sino relations which will weigh further on global trade and growth concerns,” said Jasper Lawler, head of research at London Capital Group, in a note to clients.
And “despite recent heavy selloffs, the bottom isn’t in sight and the markets have further to fall. The big swings of late are representative of a very jittery market,” added Lawler.
What stocks are in focus?
Tech stock futures are under pressure before the bell Thursday, with Apple Inc.
shedding 2.8% in premarket action, while semiconductor companies Advanced Micro Devices Inc.
, Nvidia Corp.
, and Xilnix Inc.
are all down more than 2%.
Energy exploration firms are also selling off in premarket trade, with TechnipFMC Plc
as a leading loser among S&P 500 firms before the bell Thursday. The stock has fallen more than 8% Thursday.
Shares of Netflix Inc.
are down 2.1% in premarket action, after Stifel Nicolaus cut its price target on the stock to $380 from $474.
Shares of Children’s Place Inc.
are falling more than 9% in premarket trade Thursday, hitting thirteen-month lows, after the retailer cut its earnings and margin outlook for the full year 2018.
What are other markets doing?
Asian stocks fell sharply across the board, with the bulk of losses hitting tech stocks, and the Hong Kong Hang Seng Index
bearing the brunt of losses, dropping 2.5%. European stocks
also traded lower across the board.
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