Market Snapshot: Dow futures off 350 points as arrest of Huawei exec reignites trade worries

U.S. stock futures tumbled Thursday, with selling so intense at one point that circuit breakers were triggered, after the arrest of a Huawei executive reignited trade worries that helped drag equities to their worst session since early October on Tuesday.

U.S. stock markets were closed Wednesday to mark a national day of mourning for former President George H.W. Bush, who died Friday at 94.

How are the benchmarks trading?

Futures for the Dow Jones Industrial Average YMZ8, -1.74%  were down 365 points, or 1.5%, at 24,680, though they were off overnight lows, when Dow futures fell as much 487 points.

S&P 500 index futures ESZ8, -1.62%  were off 36.2 points to 2,666, a loss of 1.3%, while Nasdaq-100 futures NQZ8, -2.07%  tumbled 118 points, or 1.7%, at 6,688.

On Tuesday, the Dow DJIA, -3.10% sank 799.36 points, or 3.1%, to 25,027.07, while the S&P 500 index SPX, -3.24% dropped 90.31 points, or 3.2%, to 2,700.06. The Nasdaq Composite Index COMP, -3.80%  tumbled 283.09 points, or 3.8%, to 7,158.43. All three benchmarks had their worst day since Oct. 10.

Read: The worst-performing stocks on ‘Tariff Man’ Tuesday

What’s driving the market?

While regular trading was closed Wednesday, there was a shortened session of electronic trading for stock-index futures that showed Dow futures bouncing 100 points. When futures reopened Thursday, the drop was so severe on S&P 500 futures that the Chicago Mercantile Exchange triggered circuit breakers to avoid worse losses. Those futures spiked down to 2,659, a drop of 1.9% before the CME stopped trading briefly to try to calm the market, said Chris Weston, head of research at Pepperstone.

S&P 500 futures tumble sharply at Thursday’s reopen

Investors were rattled by news that the Canadian authorities had arrested Meng Wanzhou, the chief financial officer of Huawei Technologies, at the request of U.S. authorities for allegedly violating sanctions against Iran. The arrest, which was made on Dec. 1, comes as the U.S. has taken several steps to restrict the Chinese technology giant, trying to persuade international allies to do the same.

China authorities reacted furiously, with the spokesperson of the Chinese Embassy in Canada demanding the release of the Huawei executive. “At the request of the U.S. side, the Canadian side arrested a Chinese citizen not violating any American or Canadian law,” said a statement on its website. Huawei itself said it was “unaware of any wrongdoing by Ms. Meng,” in a statement released on Twitter.

The latest development comes amid an already shaky backdrop for trade relations between the U.S. and China. Doubts surrounding the weekend trade moratorium at the G-20 summit between the two sides and ominous developments in the bond market drove sharp losses for stocks Tuesday.

Market participants are also paying close attention to a Dec. 5-6 meeting of the Organization of the Petroleum Exporting Countries in Vienna. Crude-oil prices renewed their descent after the Saudi energy minister proposed a smaller-than-expected cut to production, but added that the oil cartel hadn’t yet agreed to any production declines.

The recent 30% drop in oil prices from their October highs is being interpreted by some market participants as a sign of slowing global growth, given oil’s central role as an input for a range of economic activity.

What data and speeches are in focus?

Investors are also facing a heavy load of economic data Thursday:

  • The private sector added 179,000 new jobs in November, according to payroll firm ADP, below consensus estimates of 195,000, according to FactSet.
  • 231,000 Americans applied for jobless benefits in the week ending Dec. 1, according to the Labor Department, surpassing the 224,000 reading expected by economists polled by MarketWatch.
  • The Labor Department also revised up its estimate of third-quarter productivity growth to 2.3% from 2.2%, while unit labor costs rose 0.9%, less than the initially reported 1.2% climb.
  • At 10 a.m. ET, the Institute of Supply Management will issue its gauge of services sector.
  • At the same time, the Commerce Department will issue its report on manufacturers shipments, inventories and factory orders.
  • At 12.15 a.m. Atlanta Fed Chief and FOMC member Raphael Bostic will give a speech on the U.S. economic outlook.
What are the strategists saying?

“Just when you thought it was safe to go back in the water,” lamented Joel Kulina, Wedbush Securities analysts in a note to clients, “First we get DJT’s “Tariff Man’ tweet on Tuesday, followed by the shocking news of Huwei global CFO arrest at the request of the U.S.,” he said, noting that this event has weighed heavily on markets Thursday morning.

The arrest is “clearly creating further uncertainty on global trade and how companies are positioning themselves for 2019,” he wrote.

“The timing of the arrest is key here. Markets are already incredibly nervous over slowing economic growth thanks to the inverted U.S. yield curve. Relations between the U.S. and China were supposed to be on the mend after a productive G-20. However, the arrest has the potential to shatter very fragile U.S.-Sino relations which will weigh further on global trade and growth concerns,” said Jasper Lawler, head of research at London Capital Group, in a note to clients.

And “despite recent heavy selloffs, the bottom isn’t in sight and the markets have further to fall. The big swings of late are representative of a very jittery market,” added Lawler.

Read: December historically is the most wonderful time of the year for stocks

What stocks are in focus?

Tech stock futures are under pressure before the bell Thursday, with Apple Inc. AAPL, -4.40%   dropping 2.2% in premarket action, while semiconductor companies Advanced Micro Devices Inc. ADP, -2.58% Nvidia Corp. NVDA, -7.60% and Xilnix Inc. XLNX, -3.53% are all down more than 2.5%.

Energy exploration firms are also selling off in premarket trade, with TechnipFMC Plc FTI, -4.28%   as a leading loser among S&P 500 firms before the bell Thursday. The stock has fallen more than 7% Thursday.

Shares of Netflix Inc. NFLX, -5.16%   are down 2% in premarket action, after Stifel Nicolaus cut its price target on the stock to $380 from $474.

Shares of Children’s Place Inc. PLCE, -4.48%   are plunging more than 10% in premarket trade Thursday, hitting thirteen-month lows, after the retailer cut its earnings and margin outlook for the full year 2018.

Costco Wholesale Corp. COST, -2.47%   stock is in focus Thursday, after the company reported fiscal fourth-quarter same-store sales rose 8.8%, above analysts estimates. The stock has risen 0.8% in premarket trade.

What are other markets doing?

Asian stocks fell sharply across the board, with the bulk of losses hitting tech stocks, and the Hong Kong Hang Seng Index HSI, -2.47%  bearing the brunt of losses, dropping 2.5%. European stocks SXXP, -2.42%  also traded lower across the board.

Benchmark U.S. crude CLF9, -3.21%  is falling 2.5% to $51.59 a barrel, while the international benchmark, Brent crude LCOG9, -2.71% is down 2.3% to $60.16.

Gold prices GCG9, +0.21%  traded virtually unchanged, and the ICE Dollar Index DXY, -0.18% is edging slightly lower.

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