US indexes tumble as visa restrictions fuel US-China worries

October 09
09:28 2019

US stocks ended down sharply and near the day’s lows on Tuesday as news that the United States has imposed visa restrictions on Chinese officials overshadowed comments by Federal Reserve Chairman Jerome Powell suggesting openness to further interest rate cuts.

Stocks cut losses following Powell’s remarks but quickly reversed course to fall further in late trading after the US State Department said it has imposed visa restrictions on Chinese government and Communist Party officials it believes responsible for the detention or abuse of Muslim minorities in Xinjiang province.

The move stoked tensions ahead of high-level trade talks in Washington this week and added to the day’s bearishness. Earlier, the US government widened its trade blacklist to include some of China’s top artificial intelligence start-ups.

“The market was down because the headlines were negative coming into the US-China negotiations. With Powell not changing the narrative, it makes sense that on further signs of deterioration in trade that the market would sell off,” said Keith Lerner, chief market strategist at SunTrust Advisory Services in Atlanta.

Losses were broad-based, led by a 2% drop in the interest-rate sensitive S&P 500 financial index while the Philadelphia Semiconductor index dropped 3.1%.

A Bloomberg report said that Washington was moving ahead with efforts to limit capital flows to China, while a South China Morning Post report said China had toned down expectations ahead of the talks in Washington.

In his remarks, Powell also said the time has come to allow the Fed’s asset holdings to begin to expand again, and that the Fed would “soon announce measures to add to the supply of reserves over time.”

The Dow Jones Industrial Average fell 313.98 points, or 1.19%, to 26,164.04, the S&P 500 lost 45.73 points, or 1.56%, to 2,893.06 and the Nasdaq Composite dropped 132.52 points, or 1.67%, to 7,823.78.

“The overall tone from the Fed is showing a little more concern,” said Willie Delwiche, investment strategist at Baird in Milwaukee.

Market expectations have increased that the Fed will cut interest rates by a quarter percentage point in October, according to CME Group’s FedWatch tool.

Those bets were bolstered on Tuesday by data that showed US producer prices unexpectedly fell in September.

Declining issues outnumbered advancing ones on the NYSE by a 3.01-to-1 ratio; on Nasdaq, a 3.42-to-1 ratio favored decliners.

The S&P 500 posted 6 new 52-week highs and 22 new lows; the Nasdaq Composite recorded 11 new highs and 148 new lows.

Volume on US exchanges was 6.74 billion shares, compared with the 7.2 billion average for the full session over the last 20 trading days.Get access to India’s fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code “GETPRO”. Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.

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