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Global Stocks Drop Amid a Worsening Economic Outlook in China Wall Street Is Battered by Worsening Economic Outlook in China
(about 1 hour later)
Investors were confronted on Friday with more evidence that the trade war between the United States and China is weighing on economic growth, and stocks fell into their deepest decline of the week. Investors were confronted on Friday with more evidence that the trade war between the United States and China is weighing on economic growth, and stocks fell to their deepest decline of the week.
The S&P 500-stock index fell 1.9 percent by the close of trading, while markets across Europe and Asia were also lower. The economic concerns also turned up in markets for commodities like crude oil. The S&P 500-stock index fell 1.9 percent, the tech-heavy Nasdaq Composite index dropped 2.3 percent, and the Dow Jones industrial average was down 2 percent.
China, the world’s second-largest economy, had already reported a slowdown in trade and economic growth, and retail sales and industrial output suggested that the slowdown deepened in November. All three of these indexes are more than 10 percent below their recent peaks. Such declines are typically described as “corrections,” a designation that describes a market that’s seriously slumping but not yet in bear-market territory of losses of more than 20 percent.
[Read more about why economists say China’s slowdown is the worst since the global financial crisis a decade ago.] Weak data on industrial output and retail sales in China kicked off the global market downturn Friday. The numbers further inflamed worries among investors that the trade war between the United States and China is beginning to slow global economic growth. China, the world’s second-largest economy, had reported a slowdown in trade and economic growth in recent weeks. But the numbers on retail sales and industrial output suggested that the slowdown deepened in November.
Stocks were buoyed earlier this week by signs that Beijing and Washington were making progress toward a deal to end their trade war. Developments on that front continued Friday, with China pledging to suspend additional tariffs on imports of American-made cars for three months starting in the new year. Automakers’ shares rose on the news.
But more broadly, investors remained jittery, and Friday’s early decline erased the week’s gains for the benchmark S&P 500 index, which is in negative territory for the year. Technology stocks, which have been particularly sensitive to trade-war and economic growth fears, tumbled. Shares of Apple, already weighed down by concerns of an iPhone sales slowdown in China, fell 3 percent.
“People are just worried,” said Michael O’Rourke, chief market strategist for institutional brokerage firm JonesTrading in Greenwich, Conn. “The trade war is starting to hurt, and you haven’t been rewarded for chasing the rallies and people are getting a little more defensive here.”“People are just worried,” said Michael O’Rourke, chief market strategist for institutional brokerage firm JonesTrading in Greenwich, Conn. “The trade war is starting to hurt, and you haven’t been rewarded for chasing the rallies and people are getting a little more defensive here.”
Until September, Wall Street had been faring better than markets around the world, as the United States economy continued to show signs of robust growth and job creation. But gains through late September faded quickly as investors began to assess the potential for trade concerns, economic uncertainty and rising interest rates to erode corporate profit growth. Tech shares were big losers on Friday, with Apple and Microsoft dropping more than 3 percent and the sector falling 2.5 percent over all. Tech stocks have grown increasingly sensitive to headlines surrounding the trade war, a reflection of their reliance on a large network of subcontractors and factories in Asia, many in China.
But the sell-off in health care stocks was even worse. The S&P 500 health care sector fell 3.4 percent, making it the worst performing part of the market. Health shares were dragged down by a more than 10 percent loss for Johnson & Johnson, after Reuters reported that the company had kept the presence of carcinogenic asbestos in its baby powder from regulators and consumers.
[Read more about why economists say China’s slowdown is the worst since the global financial crisis a decade ago.]
Friday’s decline in the S&P 500 erased its gains for the week. The benchmark index is now down 2.8 percent for the year.
“Everything is taking a toll here,” said Chris Rupkey, chief financial economist at MUFG. “When the market falls as far as it has, it’s going to have knock-on effects, negative knock-on effects, for the economic outlook next year.”“Everything is taking a toll here,” said Chris Rupkey, chief financial economist at MUFG. “When the market falls as far as it has, it’s going to have knock-on effects, negative knock-on effects, for the economic outlook next year.”
Until September, Wall Street had been faring better than markets around the world, as the United States economy continued to show signs of robust growth and job creation. But gains through late September — stocks were up 9.6 percent for the year on Sept. 20 — faded quickly as investors began to assess the potential for trade concerns, economic uncertainty and rising interest rates to erode corporate profit growth.
Earlier this week, shares were buoyed by signs that Beijing and Washington were making progress toward a deal to end their trade war. Developments on that front continued Friday, with China pledging to suspend additional tariffs on imports of American-made cars for three months starting in the new year.
Automakers’ shares rose on the news. But as the week came to a close, investors turned increasingly defensive, opting to dump stocks.
[Read more about the turmoil that rocked Wall Street last week.][Read more about the turmoil that rocked Wall Street last week.]
Earlier in the day, markets across Asia dropped. The SSE index in Shanghai ended trading down 1.5 percent, while stocks in Shenzhen were off 2.5 percent. Japan’s Nikkei 225 index fell 2 percent, and Hong Kong’s Hang Seng dipped 1.6 percent. Earlier Friday, markets across Asia dropped. The SSE index in Shanghai ended trading down 1.5 percent, while stocks in Shenzhen were off 2.5 percent. Japan’s Nikkei 225 index fell 2 percent, and Hong Kong’s Hang Seng dipped 1.6 percent.
European markets followed a similar path, though the declines there weren’t as steep. In Britain, where Prime Minister Theresa May was rebuffed by European leaders in her request for help in navigating Britain’s exit from the European Union, the FTSE 100 was down 0.5 percent. The Euro Stoxx 50 was down 0.8 percent. European markets followed a similar path, though the declines there weren’t as steep. In Britain, where Prime Minister Theresa May was rebuffed by European leaders in her request for help in navigating Britain’s exit from the European Union, the FTSE 100 was down 0.5 percent. The Euro Stoxx 50 was down 0.6 percent.
Mrs. May’s continuing troubles also appeared to taking a toll on the pound, which slid through the day.Mrs. May’s continuing troubles also appeared to taking a toll on the pound, which slid through the day.