Dow drops 250 points amid lingering fears over US-China trade, global growth

Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., on Monday, Dec. 31, 2018. | Michael Nagle | Bloomberg | Getty Images

Stocks fell on Friday as market participants continued to worry about ongoing U.S.-China trade negotiations as well as slowing economic growth.

The Dow Jones Industrial Average fell 253 points, led lower by shares of Goldman Sachs and J.P. Morgan Chase. The S&P 500dropped 0.8 percent as the energy and financials sectors lagged. The Nasdaq Composite slipped 0.6 percent.

The Wall Street Journal reported on Friday that the two countries have not yet put together a draft on the matters they agree or disagree. The report comes as a key early March deadline approaches. It also follows President Donald Trump saying on Thursday he will not meet with Chinese President Xi Jinping before that deadline. White House economic advisor Larry Kudlow also said there is a “pretty sizable distance to go” before China and the U.S. reach a deal.

“The fear factor over the trade war has crept back into the market,” said Peter Cardillo, chief market economist at Spartan Capital Securities. “That’s going to send the market for a bumpy ride.”

“We’re probably looking at a more defensive situation until we have more clarity on the trade negotiations,” Cardillo said.

Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., on Monday, Dec. 31, 2018.

Michael Nagle | Bloomberg | Getty ImagesTraders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., on Monday, Dec. 31, 2018.

Meanwhile, the European Commission on Thursday sharply downgraded its forecast for euro zone economic growth in 2019 and 2020, rekindling fears that the global economy may be slowing down.

The rising uncertainty around U.S.-China trade relations and the growing worries over the global economy coincide with a deteriorating earnings outlook for 2019.

Earnings for the first quarter of 2019 are expected to contract by more than 1 percent, according to data from FactSet. If earnings do fall, it will be the first profit contraction for the S&P 500 since the second quarter of 2016, when they fell 2.52 percent.

“Whether the pain trade of a grinding advance in equities will persist or falter, much depends on upcoming economic and earnings data, whether protectionist tensions improve/worsen and if the bond market stays calm,” strategists at MRB Partners wrote in a note. “The technical outlook for equities looks positive, although many indexes are now approaching resistance levels. There seems to be a moderate number of investors waiting for a correction in order to add positions, which contrarily usually means that the dips will be brief.”

Equities also fell Friday as chip stocks dropped. The VanEck Vectors Semiconductor ETF (SMH) dropped 1.1 percent after an analyst at Goldman Sachs said the space had gotten ahead of itself.

“Our recent industry discussions suggest that memory fundamentals remain very soft, and prices continue to decline,” Goldman analyst Mark Delaney wrote.

Qorvo shares dropped more than 9 percent while Micron Technology lost 2.6 percent. Nvidia, meanwhile, declined more than 1.5 percent.

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