US Equities Fall on Growth and China Worries

American stocks finished down for the first time in four sessions as concerns about economic growth in China and around the world combined with negative reports about the China trade negotiations sent the major averages more than 1% lower.

The Dow shed 301.87 points, 1.22% to 24,404.48, with the S&P 500 losing 1.42%, 37.81% closing at 2,632.90. The Nasdaq was the biggest loser falling 1.91%, 136.87 points to 7,020.36.  US markets were closed on Monday for the Martin Luther King Jr. holiday.

China reported on Monday that its economy expanded 6.6% in 2018, its slowest rate since 1990. Growth in the fourth quarter was 6.4% on the year and though both numbers were expected the 0.4% decline in the growth rate was the steepest one year drop since 1.4% in 2011.

Many analysts suspect that the real growth rate on the mainland may be even lower as many of the secondary statistics that are not the focus of government touted performance saw sharper declines last year.  

Equities struck their lows after the FT reported that the US had cancelled a meeting with Chinese trade officials. White House economic advisor Larry Kudlow denied the notice saying that no meeting had been scheduled,  though, according to CNBC  a planned meeting between US and Chinese trade official was cancelled because of disagreements over intellectual property rights, one of the main US complaints about Chinese trade practices.

The US and China are observing a truce in their trade dispute which lasts until March 1^st. There has been progress in the negotiations with China agreeing to lift some tariffs on US goods and buy more US agricultural products. The key question over the Chinese requirement that foreign firms working in China have a local partner and share industrial information remains unresolved. President Trump has said that he will raise tariffs from 10% to 25% on about half of all Chinese exports to the States if there is not a permanent agreement.      

Global growth issues resurfaced when the International Monetary Fund said that the world economy was losing momentum.  The IMF cut its projection for global growth in 2019 to 3.5% from 3.7% and lowered the estimate for 2020 to 3.6% from 3.7%.

Equities in general have had a good month. After closing at 21,792.20 on December 24^th the Dow had gained 13.4 % to Friday’s close at 24,706.35. At Tuesday’s close it is 9% below its all-time high.  The S&P 500 finished on Friday 13.6% above its December 24^th low.  After Tuesday’s session is was 10.1% below its last September record. The Nasdaq Composite had increased 15.6% from its pre-Christmas low at Friday’s close.  It is 13.4% beneath its August 2018 high

Dow

Reuters

S&P 500

Reuters