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Stocks Fall Sharply Amid Tech Sector Sell-Off - U.S. Commentary


Stocks moved sharply lower over the course of the trading session on Monday, adding to the steep losses posted last week. The major averages slid firmly into negative territory, with the Nasdaq falling to its lowest closing level in almost five months.

Although the major averages all closed notably lower, the Nasdaq underperformed its counterparts. The Nasdaq plunged 219.40 points or 3 percent to 7,028.48, while the Dow tumbled 395.78 points or 1.6 percent to 25,017.44 and the S&P 500 slumped 45.54 points or 1.7 percent to 2,690.73.

The sell-off on Wall Street came amid lingering concerns about the outlook for the global economy along with uncertainty about the potential for a trade deal between the U.S. and China.

At the Asia Pacific Economic Cooperation summit over the weekend, Vice President Mike Pence said the U.S. would not back down until China changes its ways.

The stark warning dampened investor hopes for a thaw in U.S.-Chinese trade relations ahead of the G20 summit later this month in Argentina.

A pullback by shares of Apple (AAPL) also weighed on the markets, with the tech giant plummeted by 4 percent after moving higher over the two previous sessions.

The steep drop by Apple came after the Wall Street Journal said the company slashed production orders for all three of the iPhone models that were unveiled in September.

Negative sentiment was also generated by a report from the National Association of Home Builders showing a substantial decrease in homebuilder confidence in the month of November.

The report said the NAHB/Wells Fargo Housing Market Index plunged to 60 in November after inching up by one point to 68 in October. Economists had expected the index to edge down to 67.

With the much bigger than expected decrease, the housing market index dropped to its lowest level since hitting 59 in August of 2016.

"Builders report that they continue to see signs of consumer demand for new homes but that customers are taking a pause due to concerns over rising interest rates and home prices," said NAHB Chief Economist Robert Dietz.

Sector News

Technology stocks saw substantial weakness on the day, contributing to the particularly steep drop by the tech-heavy Nasdaq.

Software stocks turned in some of the tech sector's worst performances on the day, resulting in a 4.6 percent nosedive by the Dow Jones Software Index. Semiconductor and computer hardware stocks also saw considerable weakness.

Significant weakness was also visible among retail stocks, as reflected by the 3 percent slump by the Dow Jones Retail Index. The index ended the session at a nearly six-month closing low.

Biotechnology, tobacco, healthcare and chemical stocks also moved notably lower amid broad based weakness on Wall Street.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Monday. Japan's Nikkei 225 Index and Hong Kong's Hang Seng Index both advanced by 0.7 percent, while China's Shanghai Composite Index jumped by 0.9 percent.

Meanwhile, the major European markets moved to the downside on the day. While the U.K.'s FTSE 100 Index dipped by 0.2 percent, the French CAC 40 Index and the German DAX Index slid by 0.8 percent and 0.9 percent, respectively.

In the bond market, treasuries moved modestly higher, extending the upward trend seen in recent sessions. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 1.7 basis points to 3.057 percent.

Looking Ahead

Trading on Tuesday may be impacted by reaction to the latest earnings news, with Agilent (A), Intuit (INTU), Jack In The Box (JACK), L Brands (LB), and Urban Outfitters (URBN) among the companies releasing their quarterly results after the close of today's trading.

Best Buy (BBY), Campbell Soup (CPB), Lowe's (LOW), and Target (TGT) are also among the companies due to report their quarterly results before the start of trading on Tuesday.

On the U.S. economic front, the Commerce Department is scheduled to release its report on new residential construction in the month of October.

Housing starts are expected to climb to an annual rate of 1.225 million in October after tumbling by 5.3 percent to a rate of 1.201 million in September.

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