Wall Street ended its four-day rally on Tuesday as a gloomy global economic growth outlook and disappointing company forecasts dampened investor spirits at the height of fourth-quarter reporting season.
All three major U.S. stock indexes extended their losses after the Financial Times reported the Trump administration rejected an offer from China for preparatory talks ahead of next week’s high-level trade negotiations.
The International Monetary Fund trimmed its 2019 global economic growth estimates on Monday, the same day data from China confirmed the country’s slowest economic growth rate in 28 years.
“There’s so much in the background – trade, government shutdown, earnings season – you’re going to have these big swings in the markets based on the latest data,” said Paul Nolte, portfolio manager at Kingsview Asset Management in Chicago.
“(Investors) are getting more bearish and less optimistic about the outlook,” Nolte added. “We had a momentum low on Christmas Eve and I think we’ll wind up testing it over the next couple months or so.”
The downbeat China news pulled chipmakers lower, with the Philadelphia SE Semiconductor index .SOX falling 3.1 percent.
Each of the FAANG momentum stocks, a group which includes Facebook Inc (FB.O), Apple Inc (AAPL.O), Amazon.com (AMZN.O), Netflix Inc (NFLX.O) and Google parent Alphabet Inc (GOOGL.O), were down between 1.7 and 4.6 percent.
Fears of a slowdown in corporate profits were exacerbated as companies posting fourth-quarter results provided disappointing forward-looking projections.
Johnson & Johnson (JNJ.N) was down 2.3 percent after its 2019 sales forecast fell short of analyst expectations.
Shares of Stanley Black & Decker Inc (SWK.N) slid following its disappointing 2019 forecast, dropping 13.7 percent.
The Dow Jones Industrial Average .DJI fell 398.96 points, or 1.61 percent, to 24,307.39, the S&P 500 .SPX lost 45.21 points, or 1.69 percent, to 2,625.5 and the Nasdaq Composite .IXIC dropped 148.39 points, or 2.07 percent, to 7,008.84.
All 11 major sectors of the S&P 500 were in the red, with the largest percentage losses coming from industrials .SPLRCI, communications services .SPLRCL and tech .SPLRCT.
With just over 12 percent of S&P 500 companies having reported thus far, 78.7 percent of have beat Street expectations. Analysts expect S&P 500 fourth quarter earnings growth of 14.1 percent, down from 20.1 percent on Oct. 1, according to Refinitiv data.
Oilfield services company Halliburton Co (HAL.N) dropped 3.2 percent as falling oil prices LCOc1 and slowing U.S. demand weighed on its fourth-quarter results.
Travelers Cos Inc (TRV.N) reported better-than-expected quarterly profit as premium hikes offset catastrophe losses such as the California wildfires and Hurricane Michael. The stock was trading lower, down 1.5 percent.
Amid the government shutdown-related dearth of U.S. economic data, a report from the National Association of Realtors showed sales of existing homes in the United States fell in December to their lowest level in three years.
The PHLX Housing index .HGX was down 1.9 percent.
Declining issues outnumbered advancing ones on the NYSE by a 3.83-to-1 ratio; on Nasdaq, a 3.14-to-1 ratio favored decliners.
The S&P 500 posted 3 new 52-week highs and 1 new lows; the Nasdaq Composite recorded 18 new highs and 26 new lows.