Wall Street slid 1 per cent on Monday, weighed down by retailers and health stocks and after DoubleLine’s Jeffrey Gundlach said U.S. equities are in a long-term bear market and that the Federal Reserve should not raise rates this week.
Gundlach, Chief Executive Officer of DoubleLine Capital and known on Wall Street as the Bond King, in comments made on CNBC also said that passive investing had reached “mania status” and will exacerbate market problems.
The comments pushed U.S. equities back to session lows and killed off an attempted recovery.
“He (Gundlach) is not exactly painting a sunny picture for 2019,” said Kim Forrest, senior portfolio manager at Fort Pitt Capital Group in Pittsburgh.
After Gundlach’s comments, the S&P financial index gave up earlier gains to trade flat. It was the best performing among the 11 major S&P sectors. Banks, however, held on to gains of 0.25 per cent.
Gundlach said the Fed should not raise rates this week, as is widely expected, after already changing messaging on rate hikes to stabilize stocks. Earlier, President Donald Trump criticized the Fed for “even considering” another hike.
Retail stocks tumbled 2.20 per cent after British online fashion retailer ASOS’s profit warning led to concerns over consumer spending. Amazon.com Inc sank 3.3 percent and was the biggest drag on the S&P 500 and Nasdaq.
“Because of the profit warning, there is an overall question of holiday spending” in the United States, said Forrest.
The S&P healthcare index dropped 1.34 per cent after a federal judge on Friday ruled that the Affordable Care Act, commonly known as Obamacare, was unconstitutional based on its mandate requiring people buy health insurance.
All the 11 major S&P sectors were lower. Monday’s swings are the latest example of volatility that has plagued U.S. stocks for most of this month amid worries about slowing global growth.
“I still think there are just too many worries out there and the biggest worry is that global economy is slipping,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.
“Growth is slowing means earnings are going to slow. We are okay in this quarter and the first quarter of 2019, but after that I think earnings is going to be a problem for the market.”
The Dow Jones Industrial Average was down 250.02 points, or 1.04 per cent, at 23,850.49, the S&P 500 was down 28.31 points, or 1.09 per cent, at 2,571.64 and the Nasdaq Composite was down 74.68 points, or 1.08 per cent, at 6,835.98.
Goldman Sachs Group Inc dropped 1.8 per cent to a two-year low after Malaysia filed criminal charges against the bank and two former employees related to the 1MDB investigation. The stock is now the worst performer among Dow Industrials this year.
Insurer UnitedHealth Group Inc fell 1.3 per cent on the Obamacare ruling and was the biggest drag on the Dow.
Johnson & Johnson continued its slide with a 3.6-per-cent drop after a Reuters report that the pharma major knew for decades that its Baby Powder contained asbestos.
Canada’s main stock index fell on Monday, as investors turned cautious ahead of the U.S. Federal Reserve’s monetary policy guidance and concerns over slowing global growth.
At 1:46 p.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 159.22 points, or 1.1 per cent, at 14,435.21.
Ten of the index’s 11 major sectors were lower, led by a 3.2-per-cent drop in health care stocks as marijuana producers dropped.
Aurora Cannabis Inc. lost 4.5 per cent, while Canopy Growth Corp dipped 4 per cent.
The utility sector was down 1.4 per cent as AltaGas Ltd. fell 3.5 per cent. Boralex Inc. and Innergex Renewable Energy Inc. lost 3.3 per cent and 2.3 per cent, respectively.
The financial sector slipped 0.9 per cent, while the industrial sector fell 1.5 per cent.
Tech stocks lost 2.3 per cent as Shopify Inc. sat down 7.5 per cent.
Overseas, Germany’s DAX lost 0.9 per cent. That means the DAX, which represents Europe’s largest single economy, is also in bear market territory. France’s CAC 40 and Britain’s FTSE 100 both fell 1.1 per cent.
Japan’s Nikkei 225 index added 0.6 per cent and the Kospi in South Korea gained 0.1 per cent. Hong Kong’s Hang Seng was less than 0.1 per cent lower. Both the Kospi and Hang Seng are in bear markets as well.
China and the United States clashed again over their respective trade policies Monday, as China criticized what it calls a “unilateralist and protectionist” approach to trade. The U.S. ambassador to the World Trade Organization said those critiques were unwarranted. The two nations have been embroiled in a dispute over technology policy and other issues for most of this year. With no end to the conflict in sight, investors are growing more concerned that the tensions will drag down the already-slowing global economy.
Benchmark U.S. crude fell 2.2 per cent to $50.06 a barrel in New York. Brent crude, used to price international oils, dipped 0.9 per cent to $59.72 a barrel in London.
Gold rose 0.8 per cent to $1,251.80 an ounce. Silver added 0.8 per cent to $14.76 an ounce. Copper dipped 0.3 per cent to $2.75 a pound.
The dollar slipped to 112.73 yen from 113.29 yen. The euro rose to $1.1358 from $1.1303. The British pound rose to $1.2626 from $1.2579.
Reuters and The Associated Press