Stocks have been lower since the outset of trading with few signs of buyers stepping in as rhetoric steps up on both sides of the Chinese-U.S. trade fight. Treasury Secretary Mnuchin said that proposed tariffs on a further $300B worth of Chinese imports could be a month away once the impact on U.S. consumers had been studied. Meanwhile, China's Commerce Ministry reportedly said that the U.S. needs to "correct its wrong actions" if it wants to continue negotiations. Adding to the gloom were disappointing manufacturing readings in the U.S., Europe and Japan.
ECONOMIC EVENTS: In the U.S., initial jobless claims slipped 1,000 to 211,000 in the week ended May 18. Markit's flash manufacturing index fell to 50.6 in May from 52.6 in April, hitting its worst level since September 2009. New home sales dropped 6.9% to a 673,000 rate in April
In Europe, the Eurozone manufacturing flash PMI for May came in at 47.7, below the consensus estimate of 48.1 and down from 47.9 in April. The services flash in Europe also missed, dropping to 52.5 from 52.8 in April. Separate data also showed that German business confidence has fallen to a four-year low.
In Asia, Japan's flash manufacturing PMI for May fell to 49.6 from 50.2 in April.
TOP NEWS: Best Buy (BBY) reported better than expected first quarter sales and earnings, but shares have fallen 5% amid the broader market selloff. Best Buy CFO and soon-to-be CEO Corie Barry said the company's reiterated FY20 outlook "balances our better-than-expected Q1 earnings, the fact that it is early in the year and our best estimate of the impact associated with the recent increase in tariffs on goods imported from China," specifically the increase in tariffs from 10% to 25% on the products on the $200B List 3 that originally went into effect last September. Adding more color on their earnings call, Best Buy management said many vendors are willing to absorb tariff costs at 10%, but consumers will begin to be impacted with price increases at a 25% tariff rate.
Apple (AAPL) is sometimes viewed as a proxy for the state of the relationship between the U.S. and China and with tensions ratcheting up the iPhone maker's shares are sliding 2%. South China Morning Post reported, citing sources, that a growing number of people in China are switching from Apple smartphones to Huawei devices following the U.S. export ban on Huawei in a show of nationalist sentiment.
In a report posted on its website, Facebook said it estimates that fake accounts represented approximately 5% of its worldwide monthly active users during Q1 of 2019 and Q4 of 2018. The social media giant added that it removed 2.2B fake accounts in the first three months of 2019.
Avon Products (AVP) shares are up 2% after Natura & Co announced that it is acquiring Avon in an all-share transaction. Following closing, Natura shareholders will own approximately 76% of the combined company, while Avon common shareholders will own approximately 24%. Based on closing prices on May 21, the transaction values Avon at an enterprise value of $3.7B and the combined group would have an enterprise value of approximately $11B.
MAJOR MOVERS: Among the noteworthy gainers was L Brands (LB), which rose 1% after it reported better than expected results for the first quarter and raised the low end of its fiscal 2019 EPS view. Also higher was Copart (CPRT), which gained 7% after reporting quarterly results.
Among the notable losers were Bloomin' Brands (BLMN) and Chipotle (CMG), which tumbled a respective 8% and 6% after BMO Capital analyst Andrew Strelzik downgraded both stocks to Underperform, citing concerns about the impact of the Chinese outbreak of African swine fever on pork prices. Also lower was NetApp (NTAP), which fell 11% after reporting quarterly results.
INDEXES: Near midday, the Dow was down 395.55, or 1.53%, to 25,381.06, the Nasdaq was down 142.22, or 1.83%, to 7,608.62, and the S&P 500 was down 42.57, or 1.49%, to 2,813.70.
