The stock market correction worsened Thursday on mounting trade worries as the Nasdaq tumbled below an important level.
XThe Nasdaq composite slid 1.6% and undercut its May 13 low. That means the Nasdaq's rally attempt is dead, but it doesn't necessarily kill the chances for a follow-through bottoming signal. That's because the S&P 500 has not undercut its previous low and remains technically in a rally attempt.
The S&P 500 lost 1.2%, and the Dow Jones Industrial Average fell 1.1%. Small caps performed even worse, with the Russell 2000 down 2%. Volume rose sharply on both exchanges, according to preliminary data.
Invesco QQQ Trust (QQQ) fell 1.5% and also undercut its May low. Major Nasdaq components Amazon.com (AMZN) and Apple (AAPL) weakened. Amazon fell below its 50-day moving average but is still forming a large cup with handle base. Apple, which has triggered sell signals, sank to the lowest point since March 11. Amazon is still on IBD Leaderboard.
Thursday's broad market decline suggested a market bottom could take a while. Declining stocks led advancers by about a 4-to-1 ratio on the NYSE and the Nasdaq.
Nearly every S&P sector was down except utilities and real estate. Utilities Select Sector SPDR Fund (XLU) rose 0.9% and is at new highs after clearing a 59.17 buy point this week. The industry's dividends and steady revenue offer some protection.
On Thursday, China elevated the rhetoric on trade, after a spokesperson from China's Ministry of Commerce said the U.S. needs to "adjust its wrong actions" if the two sides are to keep negotiating, CNBC reported.
With talks apparently at an impasse, more economists and analysts are thinking the trade war could be protracted and hurt businesses and economic performance.
"We now think it is more likely than not that the Trump administration will move ahead with the final tranche of tariffs targeting roughly $300 (billion) in imports from China at a 25% rate," Nomura warned in a report this morning. "Our baseline scenario assumes that the new tariffs go into effect at some point before end-2019, most likely in Q3 after a meeting between Presidents Trump and Xi at the G20 in late June."
Falling Treasury yields underscored the threat to the economy. The seven-year, 10-year, and 30-year yields fell to 2.191%, 2.304%, and 2.739%, Tradeweb said. "That's down 9.3 (basis points), 8.9 bps, and 8.0 bps, respectively ... They are now at their lowest closing points since November 2017, October 2017, and December 2017, respectively," the firm said.
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Energy, technology, transportation, financial and industrial sectors were the weakest. Defensive industry groups such as tobacco, gold mining, utilities and real estate investment trust were among a few groups higher Thursday.
Oil stocks fell on a combination of higher supplies, trade worries and demand fears. The price of U.S. crude gapped down nearly 6% to $57.93 a barrel and touched the lowest price since March 11.
Drilling, oilfield services, exploration & production and oil machinery were in the bottom 10 of 197 industry groups. All were off more than 4%.
Juan Carlos Arancibia is the Markets Editor of IBD and oversees our market coverage. Follow him at @IBD_jarancibia
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