Wall St Falls Out Of Bed
Wall Street suffered its biggest one day fall Friday of The Donald Trump Presidency so far, and the biggest two day fall of well over 1,050 points. It was an achievement the President will not quickly recall in his next State of the Union Speech.
It was also the biggest one day fall in 16 months and as a result the Australian market is facing a 1.1%, or 65 point slump on the ASX 200 this morning.
The Dow plunged 665.75 points, or 2.5%, to end at 25,520 by the close - it was down 277 points several hours before trading started and fell during the whole session.
All 30 Dow stocks fell on Friday and for the week the index lost 4.1%.
The S&P 500 index fell 59.85 points, or 2.1%, to close at 2,762.13 and booked a 3.9% weekly loss. Friday’s decline was the biggest one-day drop since September 2016 and the index is down 3.9% from its all-time high set last Friday.
The Nasdaq lost 144.92 points, or 2%, to end at 7,240.95 and was down 3.5% over the week.
Investors finally noticed that the US economy was strong, that employment was booming, wages rising and interest rates surging. Getting investor attention was the January jobs report which showed non-farm payrolls rose by 200,000 in January, topping economists’ expectations for 180,000. That compared with a revised 160,000 in December (up from 148,000). The report showed strong employment growth in construction, food services and healthcare.
Average hourly earnings rose 0.3% month-over-month and 2.9% year-on-year. That was the fastest yearly rise in wages since 2009.The unemployment rate held steady at 4.1% for the fourth month in a row.
Overall it was a report that finally forced investors to look away from the share bubble and to the wider economy, what was happening to bond yields (but not the continuing fall in the US dollar).
FactSet data showed the weekly falls for the S&P 500 and the Dow were the largest since the week ending January 8 2016, while the drop for the Nasdaq was the biggest since the week ending February 5, the same year.
Eurozone shares fell 1.5% on Friday and 3.1% for the week, Japanese shares fell 1.5% and Chinese shares lost 2.5%.
But Australian shares managed to rise 1.2% having underperformed since the start of the year and rising on Friday ahead of the release of the US jobs report on Friday night - a foolish move by overconfident local investors.
For Trump, and his team Friday’s message - good jobs report, a rise in wages - is very plain: Good economic news can also be seen as bad news by the markets, as Friday’s data was.
That saw US stock markets suffer their biggest loss of the Trump presidency on Friday, following bond prices lower.
The sell-off in shares followed weeks of uncertainty and turbulence in Treasury markets as economic growth across the world has accelerated. Yields on US 10-year Treasury jumped to a series new four year highs over last week, culminating in Friday's surge past 2.85%.
The capitulation by equity investors this week follows falls on Monday and Tuesday and growing volatility as the week went on.
“This is all about interest rates,” said Jurrien Timmer, director of global macro at Fidelity Investments. “It is about the stock market finally paying attention to the bond market,” according to a quote in a Financial Times story.
Over 470 of the companies on the S&P 500 fell on Friday, with losses led by energy and tech companies.
ExxonMobil and Chevron were weak after producing poorly received 4th quarter figures. Both lost more than 5% after releasing those weak reports.
All 11 sectors that comprise the S&P declined on Friday.
Apple shares went into correction on Friday and the company’s market valuation has dropped by nearly $US100 billion from its all-time high in January, as shares in the iPhone maker and other technology groups have come under pressure.
Apple shares are down more than 10% from their peak. Not even record sales and earnings for the December quarter could stp the fall.
But one stock that did rise was Amazon, which after it better than expected result on Thursday, rose 2.8% on Friday. That left then up 2% for the week.
Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.
At the AFR he was a finance writer, Finance Editor, News Editor and Chief of Staff. At the Nine Network he was supervising producer of Business Sunday for more than 16 years. He has also written for other online and analogue print publications here and overseas.