Stocks manage to recover from session lows
U.S. stocks closed mostly lower on Thursday, 06 December 2018 after a dramatic session that saw the Dow Jones Industrial Average plunge more than 700 points at one point on fears that the arrest of a Huawei executive would reignite trade worries. However, the market clawed back most of its losses on a report that the Federal Reserve may turn more accommodative.
The Dow Jones Industrial Average declined 79.40 points, or 0.3%, to 24,947.67, though the index was down by as much as 785 points at the lowest point. The S&P 500 index dropped 4.11 points, 0.2%, to 2,696.95 and the Nasdaq Composite rose 29.83 points, or 0.4%, to 7,188.26.
Investors were rattled by news that 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, and has tried to persuade international allies to do the same.
In a sign of how unsettled investors were, stock-index futures dropped so precipitously Thursday 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.
Job-market data, a key report for the Federal Reserve ahead of its last rate-setting meeting of 2018 on Dec. 18-19, will come into focus on Friday. ADP on Thursday reported that private employers added 179,000 jobs in November, in line with economists' forecasts.
Data released Thursday showed that private-sector employment stayed strong in November, with employers adding 179,000 jobs, according to Automatic Data Processing. The Institute for Supply Management said Thursday that its nonmanufacturing index in November rose to a seasonally adjusted 60.7%the second-strongest reading in 13 years.
Among other economic data under focus, the U.S. trade deficit was $55.5 billion in October (consensus -$54.7 billion) versus a downwardly revised $54.6 billion (from -$54.0 billion) in September. The key takeaway from the report is that it doesn't reflect any improvement in the U.S trade deficit despite the tariff actions. The goods and services deficit has increased by $51.3 billion year-to-date, or 11.4%, from the same period in 2017. Nonfarm business sector labor productivity for the third quarter was revised to 2.3% (consensus 2.2%) from 2.2%. Unit labor cost growth was revised to 0.9% (Briefing.com consensus 1.2%) from 1.2%. The key takeaway from the report is that it points to fairly subdued labor costs in the third quarter, which could contribute to a willingness on the part of the Federal Reserve to be more gradual on its rate-hike path.
Initial jobless claims for the week ending 1 December decreased by 4,000 to 231,000 (consensus 225,000). Continuing claims for the week ending Nov. 24 decreased by 74,000 to 1.631 million. The key takeaway from the report is that initial claims, while down in the latest week, are starting to pick up in a move that suggests the low for this cycle has been reached.
Factory orders declined 2.1% in October (consensus -2.0%) following a downwardly revised 0.2% increase (from 0.7%) in September. Excluding transportation, orders were up 0.3%. The key takeaway from the report is that it shows a surprising lack of business investment in the face of business-friendly fiscal stimulus measures.
Bullion prices ended higher at Comex on Thursday, 06 December 2018. Gold futures notched a gain on Thursday, with the precious metal finding some haven demand alongside a weaker dollar index and sharp tumble in stock trading. Prices, however, only managed to edge up for the session as traders awaited cues on the Federal Reserve's pace of interest-rate hikes from the U.S. jobs data on Friday.
Gold for February delivery rose $1, or less than 0.1%, to settle at $1,243.60 an ounce. It had touched a high of $1,249.90, teasing the highest for a most-active contract since the first half of July, 2018. March silver fell 7.3 cents, or 0.5%, to $14.509 an ounceextending its modest 0.4% decline from Wednesday.
Crude-oil prices settled sharply lower on Thursday, 06 December 2018 after OPEC failed to offer details on its expected production cut, opting to wait until after it meets with other producers on Friday. Growing concerns that oil producers won't reach an agreement to aggressively reduce output has also weighed on prices, but U.S. government data revealing the first decline in domestic crude supplies in 11 weeks did offer a brief respite in prices from the session's lows.
Members of the Organization of the Petroleum Exporting Countries have concluded their meeting in Vienna, without deciding on output-cut figures, the Wall Street Journal reported, citing comments from OPEC delegates. The delegates also said OPEC plans to debate output figures with non-OPEC producers during their meeting Friday.
West Texas Intermediate crude for January delivery lost $1.40, or 2.7%, to settle at $51.49 a barrel on the New York Mercantile Exchangeoff the session's low of $50.08. Global benchmark February Brent crude also fell $1.50, or 2.4%, to $60.06 a barrel on ICE Futures at Europe.
Looking ahead, investors will receive the Employment Situation Report for November, the Preliminary Reading for the University of Michigan Index of Consumer Sentiment for December, Wholesale Inventories for October, and Consumer Credit for October on Friday.
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