Trader Jonathan Corpina works on the floor of the New York Stock Exchange, Wednesday, May 29, 2019. Stocks are getting off to a weak start on Wall Street led by drops in technology and health care companies. (AP Photo/Richard Drew)

US stocks slide toward first monthly loss of 2019

May 29, 2019 - 3:49 pm

U.S. stocks sped toward their first monthly loss of 2019 Wednesday as investors shift money into the safety of bonds while fleeing high-risk holdings in the health care and technology sectors.

All the major stock indexes fell in late-afternoon trading on Wall Street as the broad sell-off put the market on track for its fourth consecutive weekly loss.

The market's monthlong slump follows a yearlong run for the S&P 500 that culminated in an all-time high on April 30. The benchmark index is still up more than 10% for the year and the technology-heavy Nasdaq composite is up more than 13%.

Every major sector fell Wednesday as investors sought shelter in bonds amid concerns that global economic growth is being threatened by the trade war between the U.S. and China.

"This is just a bit of a retrenchment with this realization that this trade issue may take longer to resolve that we previously thought," said Jeff Kravetz, regional investment director for U.S. Bank Wealth Management. "That's giving concern that there is going to be lower economic growth going forward."

Traders continued to hammer technology stocks, which stand to suffer heavily in a prolonged trade war. Chipmaker Advanced Micro Devices fell 3.1%.

Health care and communications companies also bore a big share of the losses. Johnson & Johnson slid 4.2% and Google parent Alphabet dropped 1.5%.

The wave of selling also snared many big retailers. Capri Holdings, which owns Versace and Michael Kors, also fell 9.9% after issued a sales forecast that disappointed investors. Abercrombie & Fitch and Canada Goose, which makes luxury down coats, plunged after both companies issued weak sales forecasts.

Banks and other financial stocks continued declining on lower bond yields, which make loans less profitable. American Express fell 1.1%.

Rising bond prices pushed yields lower again. The yield on the benchmark 10-year Treasury note fell to 2.25% from 2.26% late Tuesday.

Real estate and utilities took more modest losses as investors favored less-risky stocks.

KEEPING SCORE: The S&P 500 index was down 0.6% as of 3:44 p.m. Eastern Time. The Dow Jones Industrial Average fell 195 points, or 0.8%, to 25,152. The index had been down 409 points earlier. The Nasdaq composite slid 0.6%. The Russell 2000 index of small companies dropped 1.1%.

Major stock indexes in Europe also fell.

MAY SLUMP: With two more trading days left in May, the S&P 500 is heading for a loss of 5.5%. That would be its first monthly loss since December. The market has been heading steadily lower this month as prospects for the economy have dimmed and as traders got more worried about the lingering trade feud between Washington and Beijing.

In early May the U.S. and China concluded their 11th round of trade talks with no agreement. The U.S. then more than doubled duties on $200 billion in Chinese imports, and China responded by raising its own tariffs.

ANALYST'S TAKE: Investors are retrenching in an attempt to wait out the worsening trade situation between the U.S. and China as they face "tariff exhaustion", said JJ Kinahan, chief marketing strategist at TD Ameritrade.

China's recent threat to use its supply of rare earths as a weapon is a worrying escalation, he said. Rare earths are chemical elements that are crucial to many modern technologies, such as consumer electronics.

"What it shows to me is that there is a little bit of a worsening relationship here," he said. "They went pretty deep in the bag to throw out something that would hurt."

SEEKING SHELTER: Rising bond prices, which pull yields lower, are typically a sign that traders feel jittery about long-term growth prospects and would rather put their money into safer holdings. The yield on the 10-year Treasury note is down 1 percentage point over the last six months, sending another strong signal that investors are concerned about weakening economic growth.

On Tuesday, the yield on the benchmark 10 year Treasury fell to its lowest level in nearly two years. It also fell below the yield on the three-month Treasury bill. When that kind of "inversion" in bond yields occurs over an extended period of time, economists fear it may signal a recession within the coming year. It has happened multiple times so far this year.

THREADBARE DUDS: Abercrombie & Fitch plunged 26% after the apparel maker disappointed investors with figures for a key sales measure. The company's sales at established stores fell shy of forecasts for the first quarter and it expects that measure to be flat in the second quarter, falling far short of analysts' predictions.

Abercrombie is also closing several important stores, including its Hollister flagship location in New York.

COOKED GOOSE: Luxury coat maker Canada Goose Holdings tumbled 28.8% after its quarterly revenue fell shy of forecasts. The company also warned investors of slower growth ahead.

The company, known for its expensive, goose feather-stuffed parkas and jackets, expects 20% revenue growth this fiscal year. That falls short of Wall Street's forecasts.

The company has been opening up its own shops over the last several years, a change from its previous practice of selling through other retailers. In addition to giving the weak forecast, Canada Goose also said it plans on opening up more of its own stores.

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