Dow drops to session lows on reports that Rod Rosenstein has resigned

Kevin Lamarque | Reuters

Deputy Attorney General Rod Rosenstein appears with U.S. President Donald Trump at a roundtable on immigration and the gang MS-13 at the Morrelly Homeland Security Center in Bethpage, New York, May 23, 2018.

On Monday, a 10 percent U.S. levy on $200 billion worth of Chinese goods came into effect. The 10 percent rate is also set to rise to 25 percent by year-end. China has retaliated, targeting duties on more than 5,000 American goods worth a total of $60 billion.

Tim Courtney, chief investment officer at Exencial Wealth Advisors, said the risk of a full-blown trade war between the U.S. and China is not being completely priced in by the market. “I think the market has expected trade disputes to get resolved. That’s been the case for the most part, except for China,” he said.

The move lower on Monday comes after the Dow and S&P 500 posted record highs on Friday and notched solid weekly gains.

“They did it in a very healthy way,” said Art Hogan, chief market strategist at B. Riley FBR. He noted that money rotated out of defensive stocks and some of the high-flying tech shares into financials. “I think we can see another bid in financials if the 10-year can hold above 3 percent.”

The benchmark 10-year Treasury note yield traded at 3.08 percent on Monday.

Energy shares rose, meanwhile, as Brent crude broke above $80 per barrel to hit its highest level since 2014 after OPEC leaders signaled they would not be boosting output immediately. The Energy Select Sector SPDR ETF (XLF) rose 1.4 percent.

“It’s clear that the OPEC meeting didn’t have a lot of talk about new supply coming,” said Hogan. The boost is coming more from “the supply side, but demand is still strong, which is a positive” for oil and energy stocks.

Comcast outbid Twenty-First Century Fox on Saturday in a $39 billion takeover of U.K. broadcaster Sky, submitting a much higher bid in a three-round auction. On Monday, the U.K. broadcaster recommended its shareholders to accept an offer from Comcast.

Meanwhile, SiriusXM announced it would buy Pandora in a stock deal worth $3.5 billion. The deal initially sent Pandora shares ripping nearly 20 percent higher in the premarket before trading about 1 percent higher.

—CNBC’s Michael Sheetz and John Melloy contributed to this report.

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