By Shreyashi Sanyal
(Reuters) - U.S. stocks fell more than 1 percent on Tuesday and were on course to end a four-day rally on fears of slowing global growth after the International Monetary Fund trimmed its outlook and weak forecasts by companies, including Johnson & Johnson.
The IMF forecast stalled a strong rally in stocks that was spurred by hopes the United States and China would resolve their trade dispute and dovish comments from the Federal Reserve.
The grim outlook on Monday was followed by China data that confirmed its slowest growth rate in 28 years, adding to fears that a slowing global growth could hurt U.S. corporate profit.
"It's a risk-off trade today and a lot has to do with just concerns over global growth," said Ryan Nauman, market strategist at Informa Financial Intelligence in Zephyr Cove, Nevada.
Johnson & Johnson (N:JNJ) fell 1.7 percent after the healthcare giant forecast weak 2019 sales, pushing the healthcare sector (SPXHC) 0.87 percent lower. The Nasdaq Biotech index (NBI) dropped 1.72 percent.
All the 11 major S&P 500 sectors were lower and five of them, including industrial (SPLRCI) and technology (SPLRCT) sectors, slipped over 1 percent. Both sectors include companies with big exposure to overseas business, including in China.
Chip stocks took a beating, with Lam Research Corp (O:LRCX) and Micron Technology Inc (O:MU) leading a 2.44 percent decline in the Philadelphia Semiconductor index (SOX).
Pressuring industrials the most was a 13.5 percent slide in shares of Stanley Black & Decker Inc (N:SWK) after the hand tools and hardware maker forecast 2019 profit below analysts' estimates.
"Earnings haven't been that bad, but everyone is focusing on the forward guidance and companies are releasing downward or subdued guidance," said Nauman.
About 12 percent of S&P 500 companies have reported results so far and analysts have lowered their fourth-quarter earnings forecast for S&P 500 companies to 14.1 percent year-over-year growth from 20.1 percent estimated on Oct. 1, according to IBES data from Refinitiv.
Despite the day's drop, all the three major indexes were still holding gains above their 50-day moving average prices, a closely watched level of near-term momentum.
At 11:42 a.m. ET the Dow Jones Industrial Average (DJI) was down 251.77 points, or 1.02 percent, at 24,454.58, the S&P 500 (SPX) was down 30.90 points, or 1.16 percent, at 2,639.81 and the Nasdaq Composite (IXIC) was down 93.92 points, or 1.31 percent, at 7,063.30.
The energy sector (SPNY), the S&P's worst performing sector last year, slipped 2.08 percent, as oil prices fell on worries of lower fuel demand from China, the world's second largest consumer. [O/R]
Halliburton Co's shares (N:HAL) fell 5.4 percent after the oilfield services company forecast lower revenue in key business areas in the first quarter, overshadowing a quarterly profit beat.
Arconic Inc (N:ARNC) fell 17 percent, the most on the S&P 500, after the aluminum products maker said it was no longer pursuing a sale.
EBay Inc (O:EBAY) jumped 7.2 percent, the most on the S&P 500, after hedge funds Elliott Management and Starboard Value urged the ecommerce platform to sell certain assets and restructure.
Declining issues outnumbered advancers for a 3.18-to-1 ratio on the NYSE and for a 2.30-to-1 ratio on the Nasdaq.
The S&P index recorded three new 52-week highs and one new low, while the Nasdaq recorded 17 new highs and 22 new lows.