The tremendous success of the nation’s holiday weekend shopping spree was not enough to overcome today’s announcement of new tariffs on steel and, even though these tariffs are for Brazil and Argentina (not China), the message received was that Trump will allow tariffs increased against China on December 15^th. This combined with contracting manufacturing data sent the Dow plunging 268 points. The weak manufacturing was the fourth in as many months signaling a possible end to expansion which is somewhat irrational given that consensus has been that consumerism will keep the expansion going, something that was much in evidence all weekend.  Nevertheless, between that and the trade issues, investors see hindrance to growth.  At 6.8 billion, volume was exactly in line with recent averages. 

mon  DECEMBER 2, 2019 / 4:56 pm 

U.S. stocks retreat on economy and trade jitters

Stephen Culp

DJ:  28,051.41  -112.59       NAS:  8,665.47  -39.70          S&P:  3,140.98  -12.65      11/29

DJ:  27,783.04  -268.37       NAS:  8,567.99  -97.48          S&P:  3,113.87  -27.11      12/2

NEW YORK (Reuters) - Wall Street stepped back from last week’s record highs on Monday, with weak U.S. manufacturing data and fresh trade worries keeping buyers on the sidelines.  All three major U.S. stock averages began the last month of the year in the red as investors returned from the long holiday weekend.  A report from the Institute for Supply Management (ISM) showed U.S. manufacturing activity contracted in November for the fourth consecutive month, stoking concerns that the longest period of economic expansion in U.S. history could be losing steam.

“The weaker-than-forecast manufacturing data doesn’t help,” said Oliver Pursche, chief market strategist at Bruderman Asset Management in New York. “That trend is likely to continue in the short term.”  “The question is will consumers continue to keep the economy afloat,” Pursche added. “And so far, the preliminary data regarding Black Friday spending is very positive. It’s a big number.”  And Cyber Monday sales were expected to hit a record following $11.6 billion in online sales on Thanksgiving and Black Friday.

Earlier, U.S. President Donald Trump tweeted that he would restore tariffs on steel imported from Brazil and Argentina, boosting shares of U.S. steel makers U.S. Steel Corp (X.N) and AK Steel Holding Corp (AKS.N) by 4.2% and 4.7%, respectively.  Still, it was the latest sign that the multi-front trade between the United States and its global trading partners will continue to dominate markets and hinder global economic growth. 

The news comes on the heels of recent Wall Street highs, driven to records last week on hopes of an imminent “phase one” trade agreement between the United States and China.  A senior adviser to Trump said on Monday it was still possible that a deal with China could be reached by the end of the year.   “This is not just about Trump announcing steel tariffs, but fears that he’s going to allow increases in tariffs against China on December 15,” added Pursche. “That’s part of the story.  “On the trade front, we need something and it doesn’t have to be much,” Pursche continued. “People have taken the slightest bit of positive news and sunk their teeth into it.”

The Dow Jones Industrial Average .DJI fell 267.35 points, or 0.95%, to 27,784.06, the S&P 500 .SPX lost 27 points, or 0.86%, to 3,113.98 and the Nasdaq Composite .IXIC dropped 97.48 points, or 1.12%, to 8,567.99. 

Of the 11 major sectors in the S&P 500, only consumer staples .SPLRCS and energy .SPNY ended the session in positive territory.  Real estate .SPLRCR, technology .SPLRCT and trade-sensitive industrials .SPLRCI were the largest percentage losers.  Monday’s slide in U.S. stocks prompted at least one large investor to pay $31 million to buy stock options that would guard against a sharper hit to stocks into the start of next year.   Among stocks, Roku Inc (ROKU.O) dropped 15.2% following Morgan Stanley’s downgrade to “underweight”. 

Declining issues outnumbered advancing ones on the NYSE by a 2.66-to-1 ratio; on Nasdaq, a 2.48-to-1 ratio favored decliners.  The S&P 500 posted 16 new 52-week highs and 2 new lows; the Nasdaq Composite recorded 65 new highs and 39 new lows.  

Volume on U.S. exchanges was 6.84 billion shares, matching the 6.84 billion average over the last 20 trading days.