Technology companies led a broad slide for stocks on Wall Street in afternoon trading Monday, placing the market on track for a downbeat start to the month after notching strong gains in November.
Trade tensions flared with China’s diplomatic retaliation for U.S. support of protesters in Hong Kong, putting investors in a selling mood. The selling accelerated after the U.S. government issued weak manufacturing and construction reports.
Technology stocks were the biggest drag on the market. Many of the companies in that sector rely on China for sales and supply chains and can become very volatile with new developments in trade negotiations. Adobe fell 1.8% and Microsoft slid 0.8%.
Industrial and communication services companies also moved lower. Honeywell shed 1.5% and Netflix dropped 1.6%.
Homebuilders also fell broadly. Hovnanian Enterprises slumped 7%.
Energy stocks held up the best as oil prices climbed 1.5%. ConocoPhillips rose 0.3% and Halliburton gained 0.9%.
The stumbling start to December is a departure from the market’s strong performance last month. The S&P 500 closed out November with its best monthly gain since June. Last week also marked the benchmark index’s seventh weekly gain in eight weeks. In that time span, the S&P 500, Dow Jones Industrial Average and Nasdaq each set multiple record closing highs.
Investor optimism that Washington and Beijing were closing on a trade deal helped spur the market’s milestone-setting run this fall, lifting it from a summer slide brought on by recession fears and uncertainty over trade.
The negotiations to end the longstanding trade war between the U.S. and China could face a tougher path this month following a flareup over Hong Kong. China said Monday it will suspend U.S. military ship and aircraft visits to the semi-autonomous territory and sanction several American pro-democracy groups in retaliation for the signing into law of legislation supporting anti-government protests.
President Trump has expressed concern that the legislation could affect negotiations. Wall Street is hoping that the nations can make progress toward at least stalling new tariffs scheduled for Dec. 15 on $160 billion worth of Chinese products, including smartphones and laptops.
KEEPING SCORE: The S&P 500 index fell 0.6% as of 2:23 p.m. Eastern time. The Dow Jones Industrial Average dropped 185 points, or 0.7%, to 27,866. The Nasdaq fell 0.9%. The Russell 2000 index of smaller company stocks fell 1%.
European markets closed broadly lower.
FORGING GAINS: United States Steel rose 3.3% and AK Steel climbed 4.5% after President Donald Trump said the U.S. would impose tariffs on steel and aluminum imports from Argentina and Brazil. Both South American nations were among a group of U.S. allies that Trump had exempted from steel and aluminum tariffs last year.
ECONOMIC WATCH: Wall Street faces a busy week of reports that could provide a clearer picture of the economy’s health.
U.S. manufacturing shrank more than expected in November, according to figures released by the Institute for Supply Management on Monday. Manufacturing has been a weak spot in the broader economy. A separate report on the services sector, which makes up the bulk of the economy, is expected on Wednesday.
Also on Monday, the Commerce Department reported an unexpected drop in construction spending during October.
Investors will get a glimpse into the health of the jobs market on Wednesday when payroll processor ADP releases its survey for November. The Labor Department will release its closely watched employment data on Friday. Solid job growth, along with consumer spending, have been among the key factors pushing economic growth.