Wall Street sinks at the beginning of a new week


- China does not back down and sends global equities lower
- S&P 500 (US500) reaches key support zone
- Diamond Offshore Drilling (DO.US) sinks to new all-time low after earnings release

Global stock markets continue to be pressured by the recent re-escalation of Sino-US trade war. News from China saying that the country is considering walking away from the negotiations only made things worse. In turn, European and Asia markets experienced another session of heavy declines the US stock market indices followed into their footsteps.

The US broad market index, S&P 500 (US500), extends declines started in the previous week. The index opened with a 1.7% downward price gap and is testing the upper limit of the support zone ranging above the 2865 pts handle. A break lower would pave the way towards the next major hurdle - 2800 pts handle. Note that the US cash index broke below the 50-session moving average (green line) for the first time in a month. Source: xStation5

NVIDIA dips after issuing warning concerning 5 display drivers

NVIDIA (NVDA.US) can be found among the underperforming US large caps at the beginning Monday’s trading. One reason for the underperformance could be an escalation of the Sino-US trade war. However, there are also company-specific issues that can justify today’s share price drop. Namely, the company issued warnings over the weekend concerning five display drivers, including NVIDIA GeForce, Quadro or NVS drivers. Some malfunctions posing severe security threat were found and the company asked users to update software immediately. While news may not have any immediate consequences for NVIDIA’s business as the company already released software updates, it should be noted that similar malfunctions were found in some of the drivers back in May. Having said that, repeated failures may cause customers to consider shifting to other GPU suppliers.

S&P 500 movers at the beginning of Monday’s session. Source: Bloomberg

Other company news

Textron (TXT.US), the US industrial conglomerate, is trading significantly higher on Monday. The company announced that it will review options for its subsidiary Kautex Textron - supplier to the automotive industry. Among options reviewed are, for example, a sale or a tax-free spin-off. The company hired Goldman Sachs, the US investment bank, as an advisor to the transactions. However, no timetable has been set for the completion. Nevertheless, today’s price gains hint that shareholders are appealed by the review.

On the other hand, shares of Diamond Offshore Drilling (DO.US) take a major step back today. The US drilling company reported earnings for the second quarter of 2019 before market open. The company was expected to report a loss per share of 0.9 USD but the report showed a wider loss of 0.99 USD per share. Revenue at $216.7 million was 5.5% lower than expected and 19% lower than in the previous year. Backlog shrank by over 9% YoY, to $2 billion, while operating expenses increased 2.2% YoY and reached $328.2 million. 

Shares of Diamond Offshore Drilling (DO.US) extend decline on Monday being pressured by disappointing quarterly report released by the company. The stock reached the lower limit of the recent trading range on Friday and with today’s share price drop it has found itself at the lowest level in history. With today’s decline YTD loss was extended to over 40%. Source: xStation5

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