Trade concerns and tech sell-off cause Wall Street to close sharply lower
|- FAANG underperforms to weigh on tech shares.
- CBOE Volatility Index rises more than 10%.
- Defensive sectors close the day higher.
After starting the day in the negative territory, major equity indexes in the United States continued to push lower to close the first day of the week sharply lower. Reflecting the flight-to-safety, the CBOE Volatility Index, Wall Street's fear gauge, rose more than 10% on the day.
The lack of positive developments from the Asia-Pacific Economic Cooperation (APEC) revived the concerns over the potential negative effects of a long-lasting trade conflict between the United States and China. Speaking to reporters at the event, Vice President Mike Pence said that the U.S. would not back down from its trade dispute with China unless Beijing were to respond to their demands. The trade sensitive S&P 500 Industrials Index closed the day 1.57% lower.
Meanwhile, Apple's disappointing sales outlook continued to weigh on the shares of its suppliers and Facebook shares fell to its lowest level in 20 months as it lost nearly 5% amid the ongoing drama surrounding the company's top management. "You're seeing that rotation away from tech. Certainly, the indexes are much more growth-oriented because of the sheer size of those companies now, and they dominate the indexes. You're going to have more underperformance of the growth names," Paul Nolte, portfolio manager at Kingsview Asset Management in Chicago, told Reuters. The S&P 500 Technology Index erased 3.8% while the S&P 500 Communication Services Index fell 2.6%.
The Dow Jones Industrial Average lost 395.78 points, or 1.56%, to 25,017.44, the S&P 500 dropped 45.56 points, or 1.67%, to 2,690.71 and the tech-heavy Nasdaq Composite fell 219.40 points, or 3.03%, to 7,028.48.
DJIA technical outlook by FXStreet Chief Analyst Valeria Bednarik
The Dow posted its lowest settlement for this November, resuming its bearish trend after correcting up to the 50% retracement of its monthly decline. The daily chart shows that it's back below its 20 and 200 SMA after recovering above them by the of last week, while the 100 DMA converges with the 61.8% retracement of the mentioned slide over 700 points above the current level. Technical indicators in the mentioned chart turned sharply lower and entered negative ground, in line with further declines ahead.
In the 4 hours chart, the technical picture also leans the risk to the downside, as the index settled well below all of its moving averages as technical indicators head south almost vertically within negative ground. The daily low at 24,896 comes as a strong support, with a break below favoring a retest of being 24,785, so far, November low.
Support levels: 24,896 - 24,941 - 24,879.
Resistance levels: 25,032 - 25,086 - 25,140.
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