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Stock Market Dives On Trade War Fears As China, Chip Stocks Hit Hard

The stock market ended sharply lower Thursday as attention turned away from Wednesday's Federal Reserve policy statement to President Trump's decision to hit China with 25% tariffs on $60 billion of Chinese goods.

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Money flowed out of stocks and into bonds as the 10-year Treasury yield slumped 6 basis points to 2.82%.

With Wall Street's attention on a brewing trade war with China, the Dow Jones industrial index took a hit, falling 2.9%. The S&P 500 crashed 2.5% and the Nasdaq composite fell 2.4%.

The Russell 2000 small cap index gave back 2.1%. Preliminary data showed volume on the NYSE and Nasdaq coming in higher than Wednesday. The Nasdaq composite marked a mild distribution day Wednesday, falling 0.3% in higher volume. Indexes likely got hit with another distribution day Thursday.

Investors were fearful as the put/call ratio hit a lofty level of 1.17.

Caterpillar (CAT), Boeing (BA), 3M (MMM) and JPMorgan (JPM) took the biggest hits in the Dow, with losses of 4% to 6%. Elsewhere, China names NetEase (NTES) and Baidu (BIDU) fell hard in the Nasdaq 100 with losses of more than 5%.

Semiconductor stocks also lagged in the Nasdaq 100. Shares of Micron Technology (MU) fell 3.4% to 58.97 ahead of its earnings report after the close.

Shares of drugmaker AbbVie (ABBV) plunged nearly 13% after the company scrapped plans to seek accelerated approval for a lung cancer drug because the drug performed  poorly in a mid-stage trial.

There was some good news in the stock market today. Shares of IBD Sector Leader Five Below (FIVE) jumped 4% to 69.96. The retailer's daily chart shows a cup-with-handle entry at 68.48, but an alternate handle area of 71.69 is also valid.

Five Below is also a member of both IBD Sector Leaders and the IBD 50. Headed into Thursday, the index was up nearly 10.7% year-to-date compared to a 1.4% gain for the S&P 500. Top gainers in the IBD 50 Thursday included Casa Systems (CASA) and HealthEquity (HQY) with gains of around 2%.

With an average daily dollar volume of $19.4 million, Casa Systems is on the speculative side, but it's been a standout performer since its December IPO at 11. Shares were recently trading around 32.

MarketSmith Growth 250 name Upland Software (UPLD) also bucked the trend, rising nearly 3% to 30.05. A recent breakout over a 25.10 buy point yielded a gain of more than 20% in less than three weeks, meaning it has the potential to be a big market leader.

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