Tuesday 3rd April 2018
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Wall Street plunged as US President Donald Trump sank Amazon and other tech stocks in a market additionally rattled by China’s retaliation with fresh tariffs on US imports.
In recent days Trump has been targeting Amazon in a series of tweets suggesting the administration will move to curtail the company’s dominance.
“Only fools, or worse, are saying that our money losing Post Office makes money with Amazon. THEY LOSE A FORTUNE, and this will be changed,” Trump tweeted on Monday. Also, our fully tax paying retailers are closing stores all over the country...not a level playing field!”
Shares of Amazon slid, down 5.3 percent as of 1.45pm in New York.
“President Trump’s comments are consistent with industry sources we have spoken to in the shipping industry, who often label Amazon’s deal with the USPS as a sweetheart deal,” DA Davidson analyst Tom Forte wrote in a note, Reuters reported.
“An argument, however, could be made that the USPS was losing billions before it expanded its service offerings for Amazon and would, still, likely lose billions if Amazon discontinued its use of the USPS tomorrow,” according to Forte.
Other tech stocks also dropped, with Netflix recently down 5.1 percent.
Wall Street followed suit. In 1.53pm trading in New York, the Dow Jones Industrial Average sank 2.8 percent, while the Nasdaq Composite Index dropped 2.6 percent. In 1.38pm trading, the Standard & Poor’s 500 Index plunged 3.2 percent.
US Treasuries rose, sending yields on the 10-year note two basis points lower to 2.72 percent.
“This is definitely a flight to safety type of market,” Peter Jankovskis, co-chief investment officer at Oakbrook Investments, told Bloomberg. “You’re seeing people coming out of the stocks that had been performing well. There’d been various stories that momentum was extended in the market place, and I would say today’s activity supports that trying to unwind a bit.”
The Dow retreated, led by slides in shares of Intel and those of Cisco Systems, down 5.3 percent and 4.6 percent respectively. One Dow stock bucked the trend, as shares of UnitedHealth Group rose, recently up 1.6 percent.
Meanwhile, an Institute for Supply Management report showed its index of national factory activity fell to a reading of 59.3 in March, down from 60.8 in February.
For some it added to concerns that the US economy is slowing. Others remained upbeat.
“The continued strength of the survey evidence is good reason to expect the apparent slowdown in economic growth in the first quarter, to 2.0 percent annualised on our calculations, will prove temporary," Michael Pearce, senior US economist at Capital Economics, said in a note.
"With global growth still strong, the depreciation of the dollar and fiscal stimulus feeding through to stronger real demand, the near-term prospects for the manufacturing sector and the broader economy still appear brighter than they have been at any point over the past five years," according to Pearce.
In the latest corporate deals, shares of Transcontinental jumped, with its Class A stock trading 9.6 percent higher at 1.12pm in Toronto, after Canada’s biggest printer agreed to buy Coveris Americas for US$1.32 billion to bolster its packaging unit.
The new assets will strengthen Montreal-Based Transcontinental’s competitive position in markets such as dairy products and pet foods, and provide entry into new industries such as agriculture and beverages, Chief Executive Officer Francois Olivier said Monday, according to Bloomberg.
The deal “positions us long term as a stronger consolidator of the industry,” Olivier told analysts Monday on a conference call, Bloomberg reported. “For now, our focus will be on integration and deleveraging.”
Transcontinental expects its acquisition of Chicago-based Coveris Americas to boost adjusted profit immediately upon closing, Chief Financial Officer Nelson Gentiletti said, according to Bloomberg.
In Europe, financial markets were closed for the Easter break.
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