Stocks opened sharply lower Monday, under pressure from global markets and feeling the first real tremors of the U.S. trade war.
XDell Technologies (DVMT), VMware (VMW) and Tesla (TSLA) were set to be early leaders in the holiday-shortened trading week, while Cisco Systems (CSCO) sagged lowest on the Dow. China-based Baozun (BZUN) fell as China names continue to struggle.
The Dow Jones industrial average opened down 0.7%. The Nasdaq Composite also slumped 0.7%, while the S&P 500 shed 0.6%.
The dollar traded higher vs. the euro and the yen. Oil prices fell, with West Texas Intermediate down 0.4% and below $74 a barrel. Bonds climbed, sending the 10-year Treasury yield down 3 basis points to 2.83%.
Locked and Loaded For Trade War
Uncertainty over trade issues deepened on Sunday, when Canada launched its tariffs on $12.6 billion of U.S. imports into the country. In addition, President Donald Trump added weight to the potential for increasing U.S. tariffs on imported autos to 20%. The European Union delegation to the U.S. on Friday had identified $294 billion in U.S. exports it said "could be subject to countermeasures" if U.S. did raise its auto import tariffs, according to the Wall Street Journal.
On Monday, the lobbying powerhouse U.S. Chamber of Commerce launched a campaign to oppose Trump's tariff-based trade strategy. The group said the policies threatened to undermine positive economic moves made by the administration. "We should seek free and fair trade, but this is just not the way to do it," Chamber President Tom Donohue told Reuters.
China's stock markets will be key to watch this week, as the game of chicken continues over the U.S.-China trade brawl. U.S. tariffs on $50 billion in goods imported from China are set to go into effect Friday. China plans to launch retaliatory tariffs on a similar range of its imports from the U.S. Declines on each country's stock market are likely to figure powerfully into the leverage each country wields at the negotiating table.
The Shanghai Composite careened 2.5% lower Monday — the index's largest one-day decline this year. The market has fallen for six straight weeks, crossing into bear market territory on June 19. The Hong Kong stock exchange was closed for one-day holiday on Monday.
The mood carried over to Japan and South Korea. Tokyo's Nikkei 225 dived 2.2%, and Seoul's Kospi in South Korea fell 2.4%.
Europe's markets kept to their early lows in afternoon trade. The CAC-40 in Paris fell 0.8% and London's FTSE 100 dropped 0.9%. The DAX in Frankfurt kept to a 0.4% decline.
Nike Pauses, Tesla Turns Real
Cisco Systems and Chevron (CVX) each dropped 1.4%, the worst decline on the Dow.
Nike (NKE) slipped 0.4%, due for a pause after spiking 11% to a fresh high on Friday, following a turnaround in North American sales. Shares are extended above a 70.35 flat base buy point, as well as a rebound from support at the stock's 10-week moving average.
Tesla powered up nearly 6% at the open, after a Sunday tweet from Chief Executive Elon Musk announced the company had hit its production target of 5,000 Model 3 vehicles last week, and had turned out 7,000 autos overall. The number 5,000 Model 3 rolled off the assembly line on Sunday. The BBC reported that Musk said in an email "I think we just became a real car company."
The gain put Tesla shares 3% below a 373.83 buy point in a nine-month base.
Dell, VMware Spike On Stock Deal; Baozun Slides
Dell Technologies surged 8.3%, and VMware leapt nearly 5% after privately-held computer maker Dell said it would acquire the shares tracking its 80% ownership in VMware. Shareholders will be able to convert each share of DVMT into 1.37 shares of Class C common stock, or $109 per share, implying total deal value of $9 billion. VMware plans to distribute an $11 billion special dividend tied to the Dell Technologies deal. Found Michael Dell reportedly owns 72% of the Dell Technology parent, which plans to list its shares on the NYSE following the exchange.
Dell Technologies ended Friday just below a 90.96 buy point in a cup-with-handle base.
China-based stocks were taking hard early hits. Autohome (ATHM) dropped 6.3%. Huazhu Group (HTHT) fell 3%. IBD 50 stock Baozun slipped 2.7%. Baozun is battling to hold support at its 10-week moving average, and above a 52.43 buy point in a third-stage flat base.
Researcher Markit releases its June manufacturing index at 9:45 a.m. ET. The Institute for Supply Management's June Manufacturing gauge is due at 10 a.m. ET, as are May construction spending estimates from the Commerce Department.
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