Stocks Pare Losses Monday, But Many Expect Near-Term Pressure

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Stocks pared their losses Monday afternoon, as President Trump threatened new tariffs on Chinese goods in response to the country’s handing of the coronavirus outbreak. Still, sentiment has been pressured. 

The S&P 500 fell 0.3%, with the Dow Jones Industrial Average down 0.75% and the tech-heavy Nasdaq as much as 0.5%. The 10 year treasury yield rose to 0.64%, as the move into safety lately has been more into cash and gold that safe bonds. The S&P 500 had fallen 1% in the morning. 

Big tech lead the way, which, when paired with generally risk-off sentiment, can often how that the market is looking for quality amidst economic uncertainty. 

Microsoft  (MSFT) - Get Report, Amazon  (AMZN) - Get Report, Apple  (AAPL) - Get Report and Netflix  (NFLX) - Get Report were all up between 0.5% and 2%. All of those companies showed strong and growing business plans on their earnings reports, although investors didn’t love every part of them. These stocks comprise roughly 20% of the S&P 500, as they’ve outperformed for the entire 2020 campaign. 

President Trump has been threatening more tariffs on China since the end of last week, putting an already vulnerable market at risk. Stock valuations have been stretched past historical norms as 2020 earnings estimates have plummeted and investors look past 2020, hoping for easing lockdowns and the end of the spread of the virus. Those two hopes are still highly questionable. 

The S&P 500 is now down about 4.4% since Thursday and Morgan Stanley Chief U.S. Equity Strategist wrote in a note that he expects a correction, which would bring the S&P 500 down roughly 5.8% from its current level. 

Some, but not all, cyclical stocks on the Dow Jones were leading the index down, with some defensive stocks rising. Nike  (NKE) - Get Report fell 0.55%, with Walgreens  (WBA) - Get Report up 1.5%. 

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