U.S. stock indexes closed lower on Monday, as investors appeared to need some convincing the United States and China would reach a trade agreement and weaker-than-expected construction data did not help their mood.
U.S. Commerce Department data helped to sour the mood as it showed construction spending fell unexpectedly in December as investment in private and public projects dropped.
The Dow Jones Industrial Average fell 205.79 points, or 0.79 percent, to 25,820.53, the S&P 500 lost 10.78 points, or 0.38 percent, to 2,792.91 and the Nasdaq Composite dropped 17.79 points, or 0.23 percent, to 7,577.57.
The pan-European STOXX 600 index rose 0.23 percent and MSCI’s gauge of stocks across the globe shed 0.19 percent.
Treasury yields fell on Monday as the market retraced a counterintuitive move higher on Friday in spite of soft U.S. manufacturing, personal income and spending data.
Gina Heeb of Markets Insider reported that slowing construction in December also hurt the market:
While 2018 was a record year for construction in the US, according to a report out early Monday, activity unexpectedly slowed in December. The Commerce Department said construction spending fell 0.6% that month, compared to economist expectations for a 0.2% increase.
The surprise fall in both private and public building activity underscored expectations for the economy to slow in 2019 as stimulus fades and tariffs disrupt trade.
Financial markets had been higher earlier on Monday following reports that the US and China could reach a deal to lower tariffs at a summit later this month. Market watchers appear to be cautiously optimistic, however, with trade-sensitive stocks like Boeing (-0.8%) falling later in the day.
“We share much of the market optimism and remain overweight stocks,” said Jon Gordon, a strategist at UBS Global Wealth Management. “But with many potential market pitfalls remaining, we caution against over-exuberance. Both the US and Chinese governments still appear wedded to a mercantilist view of trade.”
Damian J. Troise of the Associated Press reported that health care and tech stocks led the Dow lower:
The sell-off was most pronounced in industries that have shown strong gains over the last two months, including health care and technology. Financial stocks also took heavy losses.
The world’s two largest economies have pulled back from an immediate escalation of their damaging trade war since they started negotiating last month. President Donald Trump postponed a deadline for raising tariffs on more Chinese goods, citing progress in a series of talks. Now, media reports say the nations could strike a deal this month.
“The devil is still in the details and those details are still pretty sparse at this point,” said David Lefkowitz, senior Americas equity strategist at UBS Global Wealth Management. “When tariffs might be removed is definitely a key question, and also there’s still some uncertainty about whether or not a deal will be consummated.”
