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Wall Street tumbles as trade war threatens U.S. economy

Published 10/02/2019, 04:54 PM
Updated 10/02/2019, 04:54 PM
© Reuters. A trader works on the floor of the New York Stock Exchange shortly after the opening bell in New York

By Noel Randewich

(Reuters) - Wall Street's main indexes suffered their sharpest one-day declines in nearly six weeks on Wednesday after employment and manufacturing data suggested that the U.S.-China trade war is taking an increasing toll on the U.S. economy.

Adding to trade concerns, the United States won approval on Wednesday to levy import tariffs on $7.5 billion worth of European goods over illegal EU subsidies handed to Airbus (PA:AIR), threatening to trigger a tit-for-tat transatlantic trade war.

All 11 major S&P sector indexes fell, with energy (SPNY) and financials (SPSY) each down more than 2%.

The ADP (NASDAQ:ADP) National Employment Report showed private payrolls growth in August was not as strong as previously estimated, and said "businesses have turned more cautious in their hiring," with small enterprises becoming "especially hesitant."

That added to fears sparked on Tuesday when a report showed U.S. factory activity contracted to its lowest level in more than a decade.

"The fact the manufacturing side of the economy in the U.S. and globally is doing badly shouldn't come as a newsflash to anybody. But the extent of the miss yesterday is something that's driven this two-day move," said Greg Boutle, head of U.S. equity and derivative strategy at BNP Paribas (PA:BNPP).

The recent weak data has shaken investor faith in the strength of the domestic economy, which had shown relative resilience in the face of slowing global growth. Confidence in the U.S. economy has helped support Wall Street this year.

"If China buys less from us, we have less to manufacture, fewer orders to fill. This data is indicating we are not immune to this trade dispute, that it's hurting us as well as China," said Sam Stovall, chief investment strategist at CFRA Research.

The focus is now on the U.S. Labor Department's more comprehensive jobs report on Friday for further clues on the health of the U.S. economy.

The S&P 500 (SPX) and the Dow (DJI) slipped below their 100-day moving averages for the first time in about a month. Many investors believe that falling below such moving averages means the indexes are likely to fall further.

The S&P 500 is now about 5% below its all-time high hit in July after coming within striking distance of the mark two weeks ago. Over the past 12 months, the S&P 500 is down about 1%.

The Dow Jones Industrial Average (DJI) dropped 1.86% to end at 26,078.62 points, while the S&P 500 (SPX) lost 1.79% to 2,887.61.

The Nasdaq Composite (IXIC) fell 1.56% to 7,785.25.

Volume on U.S. exchanges was 8.0 billion shares, compared with the 7.3 billion average for the full session over the last 20 trading days.

The Cboe Volatility Index, or VIX (VIX), an options-based gauge of investor anxiety, rose 1.9 points to 20.47, its highest in about a month.

Activision Blizzard Inc (O:ATVI) dropped 1.2% after Bernstein downgraded the videogame maker's shares to "market perform."

Ford Motor Co (N:F) shares fell 3.3% after the carmaker reported a fall of about 5% in U.S. auto sales for the third quarter. General Motors Co (N:GM) slumped 4.0% after its quarterly sales came in slightly short of U.S. car shopping website Edmunds' forecast.

Among bright spots, homebuilder Lennar Corp (N:LEN) rose 3.8% after the company reported a better-than-expected profit as cheaper mortgage rates led to higher demand for its homes.

Johnson & Johnson (N:JNJ) gained 1.5% after the drugmaker said it will pay $20 million to settle claims by two Ohio counties, allowing it to avoid an upcoming federal trial seeking to hold the industry responsible for the nation's opioid epidemic.

Declining issues outnumbered advancing ones on the NYSE by a 3.56-to-1 ratio; on Nasdaq, a 2.75-to-1 ratio favored decliners.

© Reuters. A trader works on the floor of the New York Stock Exchange shortly after the opening bell in New York

The S&P 500 posted three new 52-week highs and 13 new lows; the Nasdaq Composite recorded four new highs and 182 new lows.

Latest comments

Now that the Republican party has changed its philosophy about cheap labor overseas to keep US prices down, have they really thought out the details of their new agenda? Where is a Ross Perot when you need him.
Great points. I suppose if you were President it would be nothing but high cotton.
"It will be a great deal and it will happen fast."
It's always a great deal, but no one knows what it is and it never happens!
china does not give a *****about a deal. trump is talking to a king of a country like he is some little punk. the dragon is going to incinerate him and the usa.
It's cloudy outside. It must be the trade war .
--- Let's bid up this market, bottom fishing -- It's just turning up
There you go. Take a deep breath, focus on the market and make lots of money.
The way Trump plays with women is another red flag. Women need protection and care not taken advantage of. Women are totally equal to men because they have fantastic strengths where men can't even get to, and women nurture children which are the backbone of our future and so why is Trump being immature about women? --- Men have to reflect maturity at every level to be competent and trustworthy caretakers, not people who think about instant gratification and about how they can beat the system for their short term goals. Trump is too immature for the job of a western leader.
dude grow up. nothing you said has anything to do with the stock market. you want to get all touchy feely go join a book club
why don't you take your opinion to Twitter or something Chrisy
Trump is cooked!
not yet he isn't. the market will have to go full recession before that happens. last December the markets dropped 15% and his approval is still higher then any of his rivals
I think you need a nanny and not a president.
the governments first and only real job is to protect the borders and defend the United States from foreign invaders. Other than that the Constitution provides equal rights and opportunity for all. If you are weak under a capitalist society there are good people and charity to assist you.
Thank the dmeocrats for causing relentless chaos. This will soon pass.
THANK TRUMP FOR CAUSING RELENTLESS CHAOS. AND GUESS WHAT? -- THE CHAOS is going to continue. People like Trump have a thick skin. They have to bounce back all the sh.. that they attract; They attract that due to the inner sh.. that they are .. pardon my lingo.  -- He means well, but when you cause a stink in so many different areas where your sub-conscious tells you people have been hurt then then the confusion created on one's inside ends moving onto one's outside. And then it reflects in a LONG TRAIL OF BROKEN GLASS dragging behind oneself. Look around him: nothing but broken glass in terms of relationships of any kind, lawsuits, distressed systems of all kind, nature, animals, polar bears walking in the rain, dismantled global heating arrangements, people confused, trading systems confused ... That kind of mess takes years to heal. I saw an employee of my business neighbor act in a similar way; there were lawsuits too, debts, upset relationships and lost credibility. Same for TRUMP!
TDS much? lol
Same level as January 2018. This could be the other side of the MOUNTAIN!
There is just AIR in the other side, no ground
all this MAGA is giving me heart problems
#Dang .. XD
ANybody see Trump twit about this
He’s busy and on TV right now. He’ll get back to tou shortly.
Lol, right
Lol
honestly it is refreshing to have data move the market instead of a tweets or headline/fake news.
Trump lol money in his bank .
ANybody see Trump twit about this?
Next stop 2,837
Someone wake Powell....
Yup. That’s the idea.
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