U.S. stocks edged lower in volatile trading on Thursday, as a rally sparked by progress in U.S.-China trade talks faded, with investors preferring defensive sectors such as real estate and utilities.
Wall Street opened higher after a Chinese commerce ministry spokesman said Washington and Beijing were in close contact over trade, and any U.S. trade delegation would be welcome, adding to the optimism over trade progress between the two economic giants.
Trading, however, has been increasingly choppy and the major stock indexes’ strong opening gains have petered out toward the end of the session in the past two days.
On Thursday, the defensive utilities and real estate rose more than 1 percent, while consumer staples was up 0.7 percent.
“Utilities and consumer staples are two key defensive sectors where people go when they are trying to hide from volatility,” said Randy Frederick, vice president of trading and derivatives for Charles Schwab in Austin, Texas.
The markets have also been pressured by a slew of headlines ranging from a potential U.S. government shutdown, interest rates to uncertainty around Brexit.
Concerns over slowing global growth next year have also rattled investors.
“There is a narrative growing that there might be a recession in 2020,” said Crit Thomas, global market strategist at Touchstone Investments in Cincinnati.
“So it’s hard for the market to really get excited when you have that sort of a narrative hanging out there.”
Fueling the fears, a Reuters poll showed the U.S. Treasury yield curve will invert next year, possibly within the next six months, much earlier than forecast just three months ago, with a recession to follow as soon as a year after that.
The Dow Jones Industrial Average was down 12.09 points, or 0.05 per cent, at 24,515.18. The S&P 500 was down 7.57 points, or 0.29 per cent, at 2,643.50 and the Nasdaq Composite was down 45.07 points, or 0.63 per cent, at 7,053.24.
Retail stocks dropped, with Under Armour sliding 4.92 per cent after the sportswear maker forecast 2019 revenue growth and profit below Wall Street estimates. The S&P retail index fell about 0.97 per cent, snapping a three-day rally.
Procter & Gamble Co gained 2.24 per cent after Bank of America Merrill Lynch upgraded the consumer goods maker’s stock to “buy” from “neutral.”
General Electric Co jumped 7.75 per cent after longtime bear JP Morgan upgraded the industrial conglomerate’s shares to “neutral.”
Canada’s main stock index sat flt on Thursday, as marijuana producers pushed health care stocks lower
At 1:27 p.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 24.43 points, or 0.17 per cent, at 14,758.63.
Rightof the 11 major Canadian sectors were trading lowered, with the consumer staples sector, up 0.45 per cent, leading the gains.
Empire Co. Ltd. rose 7.4 per cent, the most on the sector, after the company reported second-quarter results that topped analysts’ expectations.
Health care stocks dropped 4.1 per cent as Aphria Inc. fell 10.4 per cent. Rivals Aurora Cannabis Inc. and Canopy Growth Corp. lost 8.5 per cent and 4.2 per cent, respectively.
Shares in Europe will little changed in see-saw trade as investors remained uncertain about Britain’s exit from the European Union. Italian stocks outperforme on hopes of a compromise over Rome’s contested budget.
The pan-European STOXX 600 index lost 0.13 per cent and MSCI’s gauge of stocks across the globe gained 0.09 per cent.
Britain’s weakened prime minister, Theresa May, survived a late night no-confidence vote, and then said she did not expect a quick breakthrough in Brexit talks that would help get the deal through parliament.
The European Central Bank officially ended its post-crisis asset purchase program but promised to keep feeding stimulus into an economy struggling with an unexpected slowdown and political turmoil.
The euro and sterling both fell on Brexit uncertainty and comments from ECB President Mario Draghi following a central bank announcement investors viewed as dovish.
The dollar index rose 0.13 per cent, with the euro down 0.16 per cent to $1.135.
Sterling was last trading at $1.2623, down 0.05 per cent on the day.
Oil prices edged higher on Thursday, after data showed inventory declines in the United States and as investors began to expect that the global oil market could have a deficit sooner than they had previously thought.
OPEC’s output agreement with Russia and Canada’s decision to mandate production cuts could create an oil market supply deficit by the second quarter of next year, if the top producers stick to their deal, the International Energy Agency said in its monthly Oil Market Report.
U.S. crude inventories at Cushing, Oklahoma, the delivery point for U.S. crude futures, fell by nearly 822,000 barrels in the week through Dec. 11, traders said, citing data from market intelligence firm Genscape.
Brent crude was up 15 cents, or 0.3 per cent, at $60.30 per barrel. U.S. light crude was 21 cents higher, or 0.4 per cent, at $51.36 a barrel.
“The market over the last week has attempted to stabilize and I still think that’s what is happening today,” said Gene McGillian, manager of market research at Tradition Energy in Stamford, Connecticut.
“For further weakness in the market you need to see even stronger signs that demand growth is going to deteriorate and supply will continue to increase.”
Global oil supply has outstripped demand over the last six months, inflating inventories and pushing crude oil’s price at the end of November to its lowest in more than a year.
But the Organization of the Petroleum Exporting Countries and other big producers including Russia said last week they agreed to cut production by 1.2 million barrels per day (bpd).
Still, oil demand growth is slowing, OPEC said.
OPEC said on Wednesday that demand for its crude in 2019 would fall to 31.44 million bpd, 100,000 bpd less than predicted last month and 1.53 million bpd below what it currently produces.
Reuters