For another day, U.S.-China trade issues weighed heavily on stocks, with all major indexes falling sharply on pessimism over a possible deal that would lift the threat of tariffs.
XThe Dow Jones Industrial Average fell hard, shedding 2.3%, while the S&P 500 dropped 2.2%. The tech-heavy Nasdaq declined 2.6%, while the Russell 2000 fell 2.3%.
Volume rose 15.6% on the NYSE and 21.6% on the Nasdaq.
Both the Dow and the Russell 2000 pierced the 50-day moving average on the downside on higher volume than the day before, a bearish sign in the stock market today.
In another reading of the market's tone, the CBOE's Volatility Index, known as VIX, spurted to 33.7%. It's the highest reading in that index of market jitters since last December, when the Fed surprised markets with a quarter-point interest rate hike.
Faltering trade talks were the driver for Tuesday's downturn, as they were for Monday's. White House negotiators have pressured China to live up to promises it made in earlier talks. U.S. Trade Representative Robert Lighthizer accused Chinese negotiators of "retreating from commitments that have already been made," and vowed that the U.S. would slap 25% tariffs on $200 billion in Chinese imports starting Friday if no deal is struck. China said it would slap retaliatory tariffs on U.S. goods in response.
Further complicating talks, China will release its latest trade figures on Wednesday, while the U.S. will do the same one day later.
In a related economic development, Fed Vice Chairman Richard Clarida told Bloomberg Television that the Fed isn't ready to cut interest rates, despite recent declines in inflation below the central bank's 2% target rate. "We think the policy in place now will get us there," he said. "We don't see a strong case to move rates in either direction."
Bad Day On Stock Market For FANG
Much of the down action came among tech sectors such chip equipment, transportation, security software stocks and some medical equipment stocks. But companies with big exposure to China's burgeoning market also predictably suffered from the trade dispute. Boeing (BA), already troubled with possibly fatal design flaws with its 737 Max 8 passenger jets, tumbled 3.8%. Boeing is the U.S.' biggest seller to China.
Construction and farm equipment giant Caterpillar fell 2.3%. It too depends heavily on China for sales of its earth movers and other heavy construction equipment.
Meanwhile, the FANG stocks — Facebook (FB), Apple (AAPL), Netflix (NFLX) and Alphabet's Google (GOOGL) — all had tough days.
Facebook, with a 98 Composite Rating out of a best-possible 99, and just emerging from a long, deep cup with handle, dropped 2.1%. But it remained well above its 50-day moving average. Apple gave back 2.7%, but that put it back into the buy zone above its 197.79 buy point. Netflix dropped 2.2%. It's in a 46-week consolidation pattern, and its recent decline puts it just above the 50-day moving average. Google fell 1.2%. It gapped down sharply last week after disappointing Wall Street with a mild 9% Q1 EPS gain.
Some Stock Market Winners
Despite the carnage on Wall Street, a handful of companies managed gains in stock market trading Tuesday.
Kirkland Lake Gold (KL), now on the IBD 50 list, jumped 1.9% after reporting a higher-than-expected 112% rise in EPS. Kirkland has a Composite Rating of 94 and an EPS Rating of 99.
Funko Inc. (FNKO), another No. 1 in its group and also an IBD 50 listed stock, increased 2.1%. That was the fourth day in a row the stock increased, following a blowout 433% Q1 EPS gain last week that far exceeded expectations. The maker of pop culture knickknacks has an EPS Rating of just 75. But despite that, it has a 93 Composite Rating.
Gym club operator Planet Fitness (PLNT) tacked on 1.5%. It reported a 30% gain in EPS last week, and Planet stock sold off sharply on the news because it appeared to show a slowdown from previous EPS quarterly growth rates above 40%. However, a bullish presentation by the company of its growth plans helped give the stock a boost in recent days. Planet has a 92 Composite Rating and a 97 EPS Rating. It ranks first in the Leisure-Services Group.
Among ETFs, Innovator IBD 50 (FFTY) declined 1.9%.
Yields on the benchmark 10-year Treasury, meanwhile, fell from 2.51% to 2.45%.
Market watchers will be looking to see signs of distribution as the market declines. That happens when stocks trade down on higher volume, a sign that institutions and hedge funds are throwing in their hands on previous optimism. Such distribution days can signal the end of a bull market.
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