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Stock market posts worst day of 2019 after China weakens yuan
05-Aug-19 16:20 ET
Dow -767.27 at 25717.74, Nasdaq -278.03 at 7726.05, S&P -87.31 at 2844.74

https://www.briefing.com/investor/markets/stock-market-update/2019/8/5/stock-market-posts-worst-day-of-2019-after-china-weakens-yuan.htm

[BRIEFING.COM] The stock market had its worst day of 2019 with each of the major U.S. indices losing around 3% on Monday. Trade and growth concerns rattled capital markets after China devalued the yuan to its weakest level against the dollar since 2008. Broad-based selling left the S&P 500 down 3.0% for the day.

The Dow Jones Industrial Average fell 2.9%, the Nasdaq Composite fell 3.5%, and the Russell 2000 fell 3.0%.

Monday's session already began noticeably lower after China allowed the yen to weaken beyond 7 per U.S. dollar in response to President Trump's tariff threat. Global equities declined sharply, and the selling carried over into U.S. equities, which steadily declined throughout the session.

President Trump expressed his discontent on the "currency manipulation," while the People's Bank of China Governor, Yi Gang, said the central bank will not engage in competitive devaluation. China also said its companies agreed to suspend new agricultural purchases from the U.S.

It was clearly risk-off on Wall Street with all 11 S&P 500 sectors finishing with steep losses. Eight sectors finished with losses between 2.3% (health care) and 4.1% (information technology). The tech sector was pressured by shares of Apple (AAPL 193.34, -10.68, -5.2%) and semiconductor companies, many of which derive a large portion of their revenue from China. The Philadelphia Semiconductor Index dropped 4.4%.

The implied likelihood for a 50-basis points rate cut at the September FOMC meeting climbed to 23.5% versus 1.5% on Friday, according to the CME FedWatch Tool. Expectations for the Fed to step up its easing efforts amid increased risks to the economic outlook expounded the flight-to-safety in U.S. Treasuries. On a related note, all of Germany's sovereign debt yielded negative rates for the first time on Monday.

The 2-yr yield dropped 13 basis points to 1.58%, and the 10-yr yield dropped 12 basis points to 1.74%. The U.S. Dollar Index fell 0.5% to 97.58. WTI crude lost 2.0% to $54.64/bbl.

Separately, gold futures settled 1.2% higher at $1467.20/oz, further helped by weakness in the dollar and declining U.S. Treasury yields. Shares of Newmont Goldcorp (NEM 37.42, +0.51) advanced 1.4%.

Reviewing Monday's lone economic report, the ISM Non-Manufacturing Index for July:

The ISM Non-Manufacturing Index decreased to 53.7% in July (Briefing.com consensus 55.4) from 55.1% in June. The dividing line between expansion and contraction is 50.0%.
The key takeaway from the report is that it shows a continuation of a decelerating trend that has been in place since late 2018. The Non-Manufacturing Index is at its lowest level in almost three years.

Looking ahead, investors will receive the JOLTS - Job Openings report for June on Tuesday.

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