Nasdaq closes higher; Dow, S&P retreat from records on gains, worries about China deal

U.S. stocks closed mostly lower on Tuesday, with the Dow and S&P 500 retreating from records, on disappointing earnings results and doubts about a U.S. – China trade deal. The Nasdaq, however, notched a record finish on the strength of technology shares.

How did the major benchmarks fare?

Nasdaq Composite  COMP, +0.24 percent gained 20.72 points, or 0.2 percent, to a record 8,570.66, it’s third consecutive record close.

The Dow Jones Industrial Average  DJIA, -0.36 percent fell 102.20 points, or 0.4 percent, to close at 27,934.02 while the S&P 500 index  SPX, -0.06 percent shed 1.85 point or 0.1 percent to end the session at 3,120.18

The Dow and S&P’s declines came after setting their 12th and 23rd record closes of the year, respectively, on Monday.

What drove the market?

Doubts about substantive progress on a partial trade deal with China ahead of a Dec. 15 deadline for the increase of import tariffs somewhat undermined bullish sentiment Tuesday with U.S. economic growth slowing.

“We do not expect the US economy to fall into a recession through at least the end of 2022, but, with growth forecast to slow to below a 0.5 percent rate in the first half of 2020, risks of a near-term recession are elevated,” UBS economist Seth Carpenter wrote in a research note.

The economy is clearly facing several challenges, primarily from overseas, but the three rate cuts since July should help sustain growth, New York Fed President John Williams said on Tuesday.

The U.S. economy is facing headwinds from slower global growth, uncertainty from trade and muted inflation pressures, Williams said. As a result of these global factors, “growth is starting to slow in the U.S.,” Williams warned.

Wall Street also confronted a mixed earnings picture Tuesday. Home Depot Inc. HD, -5.44 percent shares closed 5.4 percent lower after reporting disappointing same-store sales and a poor outlook. The stock’s decline shaved off 80 points from the Dow.

Kohl’s Corp. KSS, -19.49 percent, meanwhile, tanked 19.5 percent on weak same-store sales, while the company cut its full-year guidance.

However, in U.S. economic data, U.S. home building rose in October and permits for future home construction jumped to a 12-year high.

Housing starts increased 3.8 percent to a seasonally adjusted annual rate of 1.314 million units last month. Housing starts rose 8.5 percent on a year-on-year basis in October.

Building permits surged 5.0 percent to a rate of 1.461 million units in October, the highest level since May 2007. The housing market has picked up in recent months after the Federal Reserve lowered interest rates, pushing down mortgage rates.

Which stocks were in focus?

Advanced Micro Devices Inc. AMD, +3.54 percent shares closed up 3.5 percent, the Nasdaq 100’s biggest gainer, after launching a new graphics card for 3-D designers, architects and engineers.

Boeing BA, -0.67 percent stock whipsawed Tuesday between gains and losses after the National Transportation Safety Board recommended the company develop a more robust design of its plane’s engine structure and components.

The recommendation was announced during an NTSB meeting Tuesday. The stock had been up in early morning trade after receiving 50 orders for its grounded 737 MAX. The stock closed 0.7 percent lower.

Shares of home-improvement company Lowe’s Cos. LOW, -1.41 percent, fell ahead of its results on Wednesday after Home Depot’s disappointing announcement. Shares fell 1.4 percent.

Shares of Medtronic PLC MDT, -0.16 percent fell 0.2 percent, even after the medical technology company reported fiscal second-quarter earnings that rose above expectations, and raised its full-year profit outlook. The stock had hit an all-time intraday high on Monday.

How did other markets trade?

U.S. Treasury yields edged lower Monday as investors kept a close watch on progress towards a phase one trade agreement between Washington and Beijing, which has kept bond traders on tenterhooks. The yield on the 10-year U.S. Treasury note TMUBMUSD10Y, -2.16 percen  fell 2.4 basis points to 1.784 percent.

Gold futures edged higher during Tuesday trade. The price of gold for December delivery GCZ19, +0.22 percent   rose $2.40, or 0.2 percent, to settle at $1,474.30 an ounce.

Oil futures were lower again on Tuesday amid reports that major oil exporter Russia wasn’t likely to advocate for deeper cuts at a December OPEC meeting. West Texas Intermediate crude for December delivery CLZ19, -0.14 percent lost $1.84, or 3.2 percent, to settle at $55.21 a barrel on the New York Mercantile Exchange, after a 1.2 percent slide on Monday.

The ICE U.S. Dollar Index DXY, +0.07 percent, representing a basket of its trading rivals, was little changed at 97.000.

In Europe, stocks ended mixed; the Stoxx Europe 600 SXXP, -0.12 percent rose 0.6 percent.

In Asia overnight Tuesday, stocks traded mixed, with the China CSI 300 000300, -0.99 percent gaining 1 percent, Japan’s Nikkei 225 NIK, -0.62 percent fell 0.5 percent and Hong Kong’s Hang Seng HSI, -0.65percent climbed 1.6 percent, to add to its sharp gain from the previous session.

Source: Market Watch