US stocks dropped in a broad sell-off on Monday as simmering geopolitical tensions spooked equity investors and drove a bond market rally while the protracted US-China trade war stoked fears of impending recession. All three major US stock indexes closed sharply lower in light trading, with little to soothe market jitters over Hong Kong protests, Argentine President Mauricio Macri's primary election defeat, and the US-China tariff dispute that has rattled markets for months.
"The stock market's selling off because the bond market is rallying like crazy," said Brian Battle, director of trading at Performance Trust Capital Partners in Chicago. The flight from risk sent gold prices up 1%, hovering at a more than six-year high. The closely-watched yield spread between US 2-year and 10-year notes narrowed to its smallest difference since at least 2010, according to Refinitiv data.
Goldman Sachs Group Inc said on Sunday that its economists see recessionary risks increasing as the US-China trade war drags on. The Dow Jones Industrial Average fell 391 points, or 1.49%, to 25,896.44, the S&P 500 lost 35.96 points, or 1.23%, to 2,882.69 and the Nasdaq Composite dropped 95.73 points, or 1.2%, to 7,863.41.
All 11 major sectors of the S&P 500 ended the session in negative territory, with financials, materials, energy and consumer discretionary suffering the largest percentage drops. 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.
Streaming platform Roku Inc gained 7.2% after a research note from Needham picked the stock over larger rival Netflix Inc. Shares of Amgen Inc advanced 4.9% following a court ruling that upheld two patents relating to its drug Enbrel. Coach owner Tapestry Inc and Versace owner Capri dropped 3.9% and 4.4%, respectively, after Chinese social media criticized the companies for selling T-shirts that showed Chinese-controlled territories of Hong Kong and Macau as countries.
Media companies CBS Corp and Viacom Inc are in the final stages of negotiating an all-stock merger that values Viacom at a discount to its Friday closing price, sending Viacom shares down 4.9%. Declining issues outnumbered advancing ones on the NYSE by a 2.33-to-1 ratio; on Nasdaq, a 2.10-to-1 ratio favoured decliners.
The S&P 500 posted 23 new 52-week highs and 22 new lows; the Nasdaq Composite recorded 42 new highs and 170 new lows. Volume on US exchanges was 6.09 billion shares, compared with the 7.24 billion average over the last 20 trading days.
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