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  • The U.S. is reportedly planning to introduce new tariffs if talks next month fails.
  • Technology shares continue to underperfom.
  • Financials rebound on falling Italian T-bond yields.

On the back of the strong performance of European equity indices, Wall Street started the day on a positive note rallied higher during the first couple of hours of the session before losing traction in the second half of the day. With the latest headlines surrounding the trade conflict between China and the U.S. further weighing on the market sentiment, major equity indexes finished the day in the negative territory.

Citing sources familiar with the matter, Bloomberg reported that the Trump administration was planning to introduce a new round of tariffs covering $257 billion worth of Chinese goods that are in the original list if talks between president  Trump and his Chinese counterpart Xi Jinping. The trade-sensitive S&P 500 Industrials index erased 1.68% following this development.  

Sharp falls witnessed in tech-giants, such as Amazon and Google, weighed on the S&P 500 Technology and the Communication Services indexes, which lost 1.9% and 1.6% on the day, respectively.  “These growth stocks just got so over-valued it is only natural to see some air come out of that balloon. That could continue for a while,” Stephen Massocca, senior vice president at Wedbush Securities in San Francisco, told Reuters on Monday.

On the other hand, easing concerns over the Italian budget crisis boosted the demand for Italian treasury bonds and dragged their yields lower to help the S&P Financials sector stage a decisive recovery today and finish the session 0.86% higher.  

The Dow Jones Industrial Average lost 245.05 points, or 0.99%, to 24,443.26, the S&P 500 dropped 17.43 points, or 0.66%, to 2,641.26 and the Nasdaq Composite fell 116.92 points, or 1.63%, to 7,050.29.

DJIA technical outlook by FXStreet Chief Analyst Valeria Bednarik

The Dow’s daily chart shows that the early attempt to regain the upside stalled a few points below the 200 DMA, while the 20 DMA has accelerated its decline crossing below the 100 DMA above the larger one. The Momentum indicator turned sharply lower below its mid-line and after correcting oversold conditions, while the RSI extended its decline and is now at 26, all of which supports additional declines ahead. Readings in the 4 hours chart also favor another leg lower, as the index briefly traded above a bearish 20 SMA before collapsing below it, while technical indicators maintain their strong bearish slopes near oversold readings, despite the latest bounce.

Support levels: 24,490 – 24,441 – 24,385.

Resistance levels: 24,500 – 24,560 – 24,618.