Glee about a giant tech merger and dread about the threat of new tariffs created a seesaw effect on Wall Street, sending stocks soaring — and then plunging Monday.
Stocks turned sharply lower in the afternoon after Bloomberg reported that the White House is considering more tariffs on Chinese goods in December if the next round of negotiations between President Donald Trump and Chinese leader Xi Jinping do not go well.
“We’ll see what happens,” said White House Press Secretary Sarah Sanders Monday about the meeting. “We’re not going to get ahead of those conversations.”
The S&P 500 fell 1.1% and the Nasdaq plunged 2.3%. The Dow was down about 410 points in late trading. It had been up more than 350 points earlier Monday morning.
The Dow was dragged lower in particular by Boeing (BA), which has significant exposure to China and also has the highest stock price in the Dow. Shares fell nearly 8%. (The Dow is weighted by stock price, not market value like most other indexes.)
IBM’s big acquisition of cloud computing software company Red Hat for $34 billion led to a short rally earlier Monday that quickly fizzled.
Concerns that Big Blue may be paying too much for Red Hat (RHT), which soared 45%, may have hurt tech and the broader market. The IBM deal was also the main bit of news since there were no significant earnings or economic reports of note Monday.
Monday’s roller coaster moves are discouraging, especially after last week’s extreme volatility, when stocks fell for a variety of reasons.
Disappointing earnings and guidance from industrial bellwethers 3M (MMM) and Caterpillar (CAT) played a part, as did worries that tech giants like Netflix (NFLX) and Amazon (AMZN) were starting to look overvalued.
Weak housing market data hurt big bank stocks as well.
To top it all off, investors remain nervous about the trade tension with China, a stronger dollar eating into profits, and rising interest rates from the Federal Reserve.
But earnings take center stage later this week. Apple, Facebook (FB), General Electric (GE), General Motors (GM), Coca-Cola (KO), Starbucks (SBUX), Kraft Heinz (KHC), Chevron (CVX) and Exxon Mobil (XOM) are among the notable firms to report results.
Wall Street will also be watching Friday’s jobs report very closely for signs of stronger wage growth and a possible uptick in inflation.