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US STOCKS-Wall Street slides on Middle East tensions, weak manufacturing data

Published 03/01/2020, 21:13
Updated 03/01/2020, 21:19
© Reuters.  US STOCKS-Wall Street slides on Middle East tensions, weak manufacturing data
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* U.S. air strike in Iraq kills head of Iran's Quds Force

* Manufacturing sector contraction sparks slowdown concerns

* Bank, airline stocks tumble; defense stocks rise

* Indexes down: Dow 0.61%, S&P 0.47%, Nasdaq 0.52%

(Updates to late afternoon, changes byline, adds NEW YORK

dateline)

By April Joyner

NEW YORK, Jan 3 (Reuters) - Wall Street fell from record

highs on Friday after a U.S. air strike in Iraq ratcheted up

tensions in the Middle East and a bigger-than-expected

contraction in the U.S. manufacturing sector raised concerns of

slowing economic growth.

Demand for safe-haven assets soared as Iran vowed revenge

for the killing of Qassem Soleimani, head of its elite Quds

Force, in an air strike authorized by U.S. President Donald

Trump. In a further blow to U.S. market sentiment, data from the

Institute for Supply Management showed that U.S. factory

activity contracted in December by the most in more than a

decade. S&P 500 bank stocks .SPXBK dropped 1.4% as the news sent

benchmark U.S. bond yields US10YT=RR to their lowest since

Dec. 12.

Shares of airlines also tumbled as oil prices jumped about

3%. American Airlines Group Inc AAL.O shares dropped 4.4%,

while shares of United Airlines Holdings Inc UAL.O fell 2.0%.

Among the S&P 500's 11 major sectors, only real estate

.SPLRCR , utilities .SPLRCU and consumer staples .SPLRCS -

all considered defensive plays - were trading higher.

Shares of U.S. defense companies jumped on news of the air

strike. Northrop Grumman Corp NOC.N shares climbed 5.3%, and

Lockheed Martin Corp LMT.N shares rose 3.3%. The two provided

the biggest boosts to the S&P 500. "Markets don't like risk, and with the killing of the

Iranian general, we may have an elevated level of

counterattacks," said Wayne Wicker, chief investment officer of

Vantagepoint Investment Advisers in Washington.

Still, the market disturbance could be fleeting, according

to Wicker. "We've looked at many types of conflicts over the

last 20 years, and they've had much more of a short-term

impact," he said.

In a sign of investor jitters on Friday, Wall Street's major

indexes extended their fall following a false report of an

attack on a U.S. military base in Iraq. By contrast, release of minutes from the December policy

meeting of the Federal Reserve, in which policymakers agreed

interest rates would likely stay on hold for "a time," had

little impact on U.S. stocks.

The Dow Jones Industrial Average .DJI fell 176.25 points,

or 0.61%, to 28,692.55, the S&P 500 .SPX lost 15.37 points, or

0.47%, to 3,242.48 and the Nasdaq Composite .IXIC dropped

47.26 points, or 0.52%, to 9,044.93.

Among advancers, Tesla Inc TSLA.O shares hit a record high

and were last up 3.5% after the automaker beat estimates for

vehicle deliveries in the fourth quarter. Lamb Weston Holdings Inc LW.N shares surged 11.6%, the

biggest percentage gain on the S&P 500, after the frozen foods

supplier's quarterly results surpassed estimates.

Shares of retailer L Brands Inc LB.N rose 7.7% after Bank

of America upgraded its rating on the company's stock.

Declining issues outnumbered advancing ones on the NYSE by a

1.17-to-1 ratio; on Nasdaq, a 1.68-to-1 ratio favored decliners.

The S&P 500 posted 19 new 52-week highs and one new low; the

Nasdaq Composite recorded 52 new highs and 12 new lows.

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