U.S. stocks fell sharply on Wednesday to start off 2019 as disappointing economic data from China and Europe and lingering concerns over global trade hampered risk appetite.
The Dow Jones Industrial Average dropped about 360 points to start off the session, led by a decline in Caterpillar. These losses come after the 30-stock index completed its worst year in a decade on Monday. The S&P 500 pulled back 1.4 percent as tech and industrials lagged. The Nasdaq Composite fell 1.6 percent as shares of Facebook, Amazon, Apple, Netflix and Google-parent Alphabet all declined.
The moves Wednesday come after a private sector survey showed manufacturing activity in the world’s second-largest economy contracted for the first time in 19 months. China’s Markit Manufacturing Purchasing Managers’ Index (PMI) for December dipped to 49.7 from 50.2 in November.
Meanwhile, the euro zone manufacturing PMI remained at its lowest level since February 2016, according to IHS Markit. The data also showed confidence about the future hit a fresh six-year low.
“Everybody is terrified that this is a sign of a global slowdown,” Art Cashin, director of floor operations at UBS, told CNBC’s “Squawk on the Street. ” “It was only eight months ago we were talking about synchronized growth and all of that is falling apart.”
The weaker-than-expected data follows a poor official survey on factory output, compounding concerns about a possible economic slowdown this year.
Stocks also fell after The New York Times reported that U.S. Trade Representative Robert Lighthizer has told friends and associates he wants to prevent President Donald Trump from accepting “empty promises” from China on the trade front. The report also says Lighthizer has warned Trump that additional tariffs may be needed to get meaningful concessions from the Chinese. The two countries are currently negotiating a trade deal after exchanging tariffs on billions of dollars worth of their goods.
Shares of tech-related companies were among the worst performers. Netflix’s stock dropped 2.9 percent after an analyst at SunTrust Robinson Humphrey said subscriber growth — a key metric for the company — fell short of expectations in the fourth quarter. Chipmakers Nvidia and Advanced Micro Devices both dropped more than 1.5 percent while Micron’s stock pulled back more than 1.2 percent.
Tesla shares also fell 9.6 percent after releasing weaker-than-expected delivery numbers for the fourth quarter.
Wall Street concluded trading in 2018 on Monday, with all major stock indexes registering their worst yearly performances since the financial crisis.
Despite solid gains on Monday, the S&P 500 and Dow Jones Industrial Average were down 6.2 percent and 5.6 percent, respectively, for 2018. Both indexes posted their biggest annual losses since 2008, when they plunged 38.5 percent and 33.8 percent, respectively. The Nasdaq Composite lost 3.9 percent in 2018, its worst year in a decade, when it dropped 40 percent.
The S&P 500 and Nasdaq also registered their worst quarterly performances since late 2008, while the Dow logged its biggest quarterly loss since 2009. A sizable chunk of this quarter’s losses came during a violent December. The indexes all dropped at least 8.7 percent for the month. The Dow and S&P 500 also recorded their worst December performance since 1931.
“The silver lining to last year’s disappointing equity market is that negative returns do not historically carry over into the succeeding year,” Craig Johnson, chief market technician at PiperJaffray, said in a note to clients. “The S&P 500 has bounced off support near 2,350.”
“While acknowledging there are fundamental concerns, we do not believe the current economic backdrop warrants the degree of bearish sentiment and suspect the proverbial bar for stocks has dropped significantly,” Johnson said. “Technically, we continue to see signs of an intermediate-term bottom emerging and recommend investors tactically deploy capital back into equities.”