Wall Street slides on geopolitical, recession fears

U.S. stocks dipped in a broad sell-off on Monday as rising geopolitical tensions spooked investors away from equities and the extended U.S.-China trade war stoked fears of impending global recession.

Traders work on the floor at the New York Stock Exchange (NYSE) in New York, U.S., August 12, 2019. REUTERS/Eduardo Munoz
All three major U.S. stock indexes started the week in the red, with few earnings reports and no economic data to soothe market jitters over protests in Hong Kong, the rejection of Argentine President Mauricio Macri’s economic agenda in primary elections, and a tariff dispute that has beleaguered markets for months.

“It’s the end of summer so a lot of market players aren’t on the job,” said Bucky Hellwig, senior vice president at BB&T Wealth Management in Birmingham, Alabama. “It happens seemingly every August where we have events that move the market out of proportion to the events.”

Goldman Sachs Group Inc said on Sunday that its economists see recessionary risks increasing as the trade war between the world’s two largest economies drags on, and no longer expect a resolution before the 2020 U.S. presidential election.

The move away from risk sent gold prices higher and U.S. Treasury yields lower.

“It’s a flight to safety given the global situation, from Hong Kong to Strait of Hormuz,” Hellwig added.

Data on inflation, housing starts and retail sales are due later in the week, and will be scrutinized by market participants for signs of economic softening.

“Consumer confidence has held up well so we’ll see where the rubber meets the road with retail sales,” said Hellwig.

The Dow Jones Industrial Average fell 308.75 points, or 1.17%, to 25,978.69, the S&P 500 lost 30.85 points, or 1.06%, to 2,887.8 and the Nasdaq Composite dropped 79.90 points, or 1%, to 7,879.24.

All 11 major sectors of the S&P 500 were in the red, with financials, energy and materials suffering the largest percentage losses.

Second-quarter reporting season is approaching the finish line, with 452 of the companies in the S&P 500 having reported. Of those, 73.5% have beaten consensus estimates.

Looking ahead to the third quarter, there have been 58 negative pre-announcements compared with 19 positive, resulting in a 3.1 negative-positive ratio, higher than 2.7 average since 1997.