Stocks fell on Tuesday, the first trading day of the week, as weak data out of China and lower global growth estimates from the International Monetary Fund renewed fears of the global economy slowing down.
The Dow Jones Industrial Average dropped 164 points, led by losses in DowDuPont and Caterpillar. The S&P 500 pulled back 0.9 percent as the energy and industrials sectors lagged. The Nasdaq Composite declined 1.05 percent.
The Chinese economy grew by 6.6 percent last year, according to official numbers released by China’s government. That growth matched analyst expectations. However, it was also China’s slowest growth pace in 28 years.
China’s economic data come as it tries to strike a permanent trade deal with the U.S. Both countries have been in a trade war since last year, slapping tariffs on billions of dollars worth of their goods.
Jonathan Fenby, chairman of the China team at TS Lombard, thinks an upcoming meeting between U.S. and Chinese trade officials could defuse the situation, but only temporarily.
“Vice-Premier Liu He will arrive in the US with an array of gifts, including measures such as a reduction in excess car duties and increased purchases of farm products and energy as well as assurances that Beijing intends to make more moves on market opening, intellectual property and technology transfer,” Fenby wrote in a note to clients on Sunday. “But the structural issues remain and present fundamental difficulties.”
“In the end, it will all depend on how Trump decides between a short-term outcome and longer-term aims, which will involve broader domestic political calculations,” Fenby added.
The IMF, meanwhile, said Monday the global economic expansion is losing momentum. This led the institution to trim its 2019 growth forecast to 3.5 percent from 3.7 percent. The Fund also cut its 2020 growth outlook to 3.6 percent from 3.7 percent.
The major indexes fell to their lows of the day after the National Association of Realtors said U.S. existing housing sales fell to their lowest level in three years. The iShares U.S. Home Construction ETF (ITB) pulled back 1.2 percent.
Stocks came into Tuesday’s session riding a four-week winning streak, their longest since August, as investors have largely shrugged off fears of a slowdown in earnings growth as well as an ongoing U.S. government shutdown. The S&P 500 is also up more than 10 percent since Dec. 24.
“As impressive as the recovery has been, there is still growing concern over the current V-shaped recovery due to correction lows historically being retested, as was the case in ’11 and ’16,” said Craig Johnson, chief market technician at PiperJaffray, in a note. “While recent history and an overcrowded consensus suggest the market may revisit the December lows, we believe there is sufficient evidence that also suggests a double-bottom is not mandatory for the current recovery process.”
Arconic fell about 20 percent after announcing it would abandon the pursuit of a company sale.
Shares of eBay jumped 9 percent after hedge fund Elliott Management revealed a $1.4 billion stake in the company. Elliott also sent extensive recommendations to the company’s management team.