Why Did The Dow Jones Fall Nearly 500 Points On Friday?
The Dow falls nearly 500 points after wider market selloffs.
The Dow Jones industrial average ended this week in poor stead. Losses in the stock market on Friday put the Dow at 24,100, it dropped 497 points (2%) during the trading session. We also saw the S&P 500 fall 19.% and the Nasdaq fell by 2.3%.
So what’s behind these wide-scale losses? Global trade tension between China and the U.S is causing investors to trade with more caution than we usually see. China has missed economist estimates of its retail sales and industrial output in November. This is a direct result of the trade-war.
To put investors at ease, China’s National Bureau of Statistics said the economy “performed within the reasonable range.”
This statement was not taken seriously as investors are still reluctant to believe that the trade will improve anytime soon. However, China’s Ministry of Finance announced on Friday that it would stop tariffs on American-manufactured cars and parts. This tariff will be paused for three months starting January 1, 2019.
Was Apple Stock Behind The Declines?
Apple stock (NASDAQ: AAPL) was the frontrunner of the market’s decline, Apple shares fell more than 5 points on Friday (3%) to $165.48.
Apple stock price is now at levels almost 30% below its peak of $233.47. AAPL stock encountered selloffs after a series of Wall Streets most reputable analysts downgraded the company stock. These downgraded were attributed to an expected decrease in iPhone demand.
Apple has been in a correction pattern for over 10 weeks consecutively, so it is expected that the Dow Jones will take time to recover.
Another company that helped slow the Dow Jones on Friday was Johnson & Johnson. Johnson & Johnson stock price fell by 10% on Friday, which slashed the company’s value by nearly $40 billion. The decline came after a Reuters report said that the company was aware that asbestos was in its baby powder products. The company dropped 15 points (10%) to $132.80.
J&J is one of the most popular stocks to hold and its decline had a major impact on the Dow Jones. Around 100 points was slashed from the Dow Jones due to Johnson & Johnson stock decline.
Friday left the US stock markets in their second week of losses. The S&P 500 is down 11% in Q4 and is on track for its worst quarter in 7 years. Bank Of America Merrill Lynch reported that investor selloffs took $39 billion from global equities last week.
To conclude, 2018 has been a strong year for the U.S economy, with job growth at healthy levels and inflation levels not too high. Many economists are expecting the next 12-months to deliver slower economic growth than this year.
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