Stocks shudder on Wall Street following steep drops overseas
U.S. stocks slumped broadly on Wall Street Tuesday, sending the Dow Jones Industrial Average down 200 points and extending the market’s recent string of losses.
The latest selling came as investors grew unsettled by slowing economic growth in China and the growing costs of President Donald Trump’s aggressive trade policies.
China’s economy grew 6.5 percent from July to September, the slowest pace since early 2009. The world’s second-largest economy was cooling even before the outbreak of a tariff war with Washington. That contrasts with the momentum of the U.S. economy. The government is expected to say Friday that the U.S. economy grew by 3.3 percent in the third quarter, after growing by 4.2 percent in the second quarter.
The strong U.S. economy has helped power earnings growth for companies in the S&P 500. While those companies are expected to deliver 21.9 percent earnings growth for the third quarter, investors are concerned about future growth amid rising inflation, interest rates and uncertainty over trade.
“That’s the story, it’s not the current quarter results, but the commentary going forward, the impact of tariffs and what that means in terms of costs,” said Willie Delwiche, an investment strategist at Baird. “If tariffs didn’t come up in earnings calls and commentary, then maybe you could say we were moving away from that, but the opposite is happening.”
Caterpillar’s stock price tumbled after the heavy equipment manufacturer warned that Trump’s taxes on imported steel were driving up production costs. The stock skidded 6 percent to $121.
3M fell 4.5 percent to $192.29 after its earnings missed Wall Street’s targets. Caterpillar and 3M were, by far, the biggest decliner in the 30-company Dow average.
Technology companies, health care and energy stocks also accounted for much of the slide on Wall Street, which followed a steep sell-off in Chinese and other global markets.
The S&P 500 fell 25 points, or 0.9 percent, to 2,730 as of 1:15 p.m. Eastern Time. The index is on course for its worst month since September 2011 and is down 7.5 percent from its most recent high in September.
The Dow erased much of its early losses. It was down 227 points, or 0.9 percent, to 25,089. The average was down more than 540 points earlier.
The Nasdaq slid 69 points, or 0.9 percent, to 7,399. The Russell 2000 index of smaller-company stocks gave up 16 points, or 1.1 percent, to 1,523. The index is now down for the year.
Decliners outnumbered gainers on the New York Stock Exchange by a ratio of nearly 8 to 1.
Bond prices rose, sending the yield on the 10-year Treasury note down to 3.14 percent from 3.19 percent late Monday.
The Chicago Board Options Exchange’s volatility index, known as the VIX, or fear index, jumped 14 percent to its highest level in two weeks.
Hong Kong’s Hang Seng index sank 3.1 percent and European markets traded lower.
Markets have been rattled in recent weeks by increased worries over the impact that rising interest rates, inflation and the escalating trade dispute between the U.S. and China may have on Corporate America.
Trump has imposed tariffs on about $250 billion in Chinese imports, and Beijing has retaliated by targeting $110 billion in American products. Trump has threatened to tax another $267 billion in Chinese products — a move that would cover virtually everything China ships to America.
The two countries are locked in a dispute over U.S. allegations that China steals U.S. technology and forces U.S. companies to share trade secrets in exchange for access to the Chinese market.
Technology and health care companies also took heavy losses Tuesday. Nvidia gave back 4.2 percent to $221.63, while Centene fell 8.2 percent to $129.67.
Truck maker Paccar tumbled 6.9 percent to $56.35, while engine manufacturer Cummins slid 3.4 percent to $135.17.
Traders bid up shares in McDonald’s after the fast-food chain reported third-quarter results that topped analysts’ forecasts. The stock gained 6.2 percent to $176.91.
Close to 17 percent of companies on the broad S&P 500 index have reported earnings for the third quarter, and over half of them did better than expected.
“They’re coming in ahead of expectations, generally, but the degree to which they’re beating expectations is less than what it has been in previous quarters,” Delwiche said. “That’s why there’s some concern there.”
Tesla was among the few winners Tuesday. The stock vaulted 9.2 percent to $285.13 after Citron Research, a company that for years had bet against the stock, reversed its position and put out a note saying it would be a long-term investor in the electric car and solar panel company.
Benchmark U.S. crude fell 4.4 percent to $66.33 per barrel in New York. Brent crude, used to price international oils, dropped 4.1 percent to $76.52 per barrel in London.
The decline in oil price weighed on energy stocks. Halliburton dropped 3.3 percent to $35.21.
The dollar weakened to 112.19 yen from 112.82 yen on Monday. The euro rose to $1.1486 from $1.1466.
In Europe, the focus was on Italy’s dispute with the European Union over its plan to ramp up public spending. The plan expands its targeted deficit to 2.4 percent of GDP next year, three times more than promised by the previous government.
The European Union has rejected Italy’s budget, a first for an EU member. It’s worried that the plans would prevent Italy from lowering its debt, which is second only to Greece among its members. International credit rating agency Moody’s has downgraded Italy’s credit rating.
Germany’s DAX slid 2.2 percent and France’s CAC 40 fell 1.7 percent lower. Britain’s FTSE 100 lost 1.2 percent.
In Asia, Japan’s Nikkei 225 index gave up 2.7 percent and the Kospi in South Korea tumbled 2.6 percent. Australia’s S&P-ASX 200 dipped 1.1 percent.
AP Economics Writer Paul Wiseman in Washington contributed to this report.