U.S. stocks declined at the start of the first trading session of 2019, after data showing a contracting Chinese manufacturing sector reinforced investor concerns about a slowing global economy.
Major markets were closed on Tuesday for the New Year holiday.
How are benchmarks trading?
The Dow Jones Industrial Average
fell 350 points, or 1.5%, at 22,972, the S&P 500 index
retreated by 33 points, or 1.4%, at 2,473, while The Nasdaq Composite Index
fell 101 points, or 1.5%, at 6,533.
What’s driving the market?
Investors kicked off the new year with fresh angst, driven by worries over the health of the world’s second-largest economy, China, which has fueled an aversion to assets perceived as risky.
Beijing’s official read of manufacturing for December, released Wednesday, showed a more severe drop than one issued earlier, reflecting a fall to the weakest level since February 2016.
The Caixin manufacturing purchasing managers index fell to 49.7 in December. A reading below 50 signals weakening conditions and would mark the weakest reading since 2017. Official figures suggest the sector is contracting for the first time in 2½ years.
Meanwhile, growth in Germany’s manufacturing sector also slowed, according to Markit’s Purchasing Manager’s Index, which fell to a 33-month low, further raising concerns about a global economic slowdown that investors worry could spill over into the U.S.
The economic softness also comes as investors are concerned about a protracted tariff dispute between Beijing and Washington, which analysts have said could aggravate a retrenchment in both economies.
Market participants also are watching a partial U.S. government shutdown that is nearing its second week, with President Donald Trump inviting top lawmakers to sit down Wednesday afternoon and discuss reopening the government by resolving a dispute over funding for the expansion of the U.S.-Mexico border wall.
What were analysts saying?
The post-Christmas “melt-up” markets experienced in recent days is being “unwound a bit,” wrote Joel Kulina, analyst at Wedbush Securities in a Wednesday note to clients.
“Given global growth concerns & lingering uncertainty from trade/tariff wars, have to think investors will adopt a more cautious approach to 2019 to get a sense of when or where we may find a bottom,” he wrote.
“Risk Sentiment remained supported during the last day of the year, boosted by Trump’s remarks over the weekend. However, markets started 2019 on a defensive note after China’s Caixin manufacturing PMI for December slipped into contractionary territory for the first time since May 2017, reviving fears over a slowdown in the world’s second largest economy,” wrote Charalambos Pissouros, senior market analyst at JFD Brokers, in a Wednesday research note.
What data are ahead?
At 9:45 a.m. Eastern Time, IHS Markit will release its final reading of its U.S. Purchasing Manager’s Index for the month of December, with expectations that it will remain steady at 53.9, according to FactSet data.
What stocks are in focus?
shares are down 3.1% Wednesday, after SunTrust Robinson Humphrey analysts cut their price target on the streaming firm from $410 to $355.
stock is in focus Wednesday, after the electric-car manufacturer announced fourth-quarter deliveries below analysts expectations, while also saying that it would cut the price of its Model S, Model X and Model 3 by $2,000. The stock is down 7.8% Wednesday morning.
How were other markets performing?
Asian markets closed sharply lower on Wednesday, with Hong Kong’s Hang Seng Index
leading the way with a 2.8% decline to 25,130.35, while the Shanghai Composite
fell 1 .2% to 2,466.25.29.
In Europe, equities have also traded lower, with the Stoxx Europe 600
Oil futures are falling Wednesday, with West Texas Intermediate crude
for February delivery down 1.8% to $44.60 per barrel, while the U.S. dollar
rose 0.6% and the price of gold
edged 0.3% higher.
Providing critical information for the U.S. trading day. Subscribe to MarketWatch’s free Need to Know newsletter. Sign up here.