Stocks fell sharply on Wednesday, adding to Wall Street’s poor start to the final quarter of 2019 as investors grapple with fears of an economic recession.
The Dow Jones Industrial Average declined by 454 points, or 1.7% to break below its 50-day and 100-day moving averages, two technical levels watched by traders. Dow Inc was the worst-performing stock on the 30-stock index, sliding 3%.
The S&P 500 lost 1.7% to fall below its 100-day moving average as the industrials sector dropped 1.5%. Eaton Corp and United Rentals were among the laggards in the sector. They both fell at least 1.9%.
The Nasdaq Composite slid 1.5% as large-cap tech companies followed the broader market lower. Amazon, Apple and Alphabet all dropped at least 1%.
Concern around the economy was sparked on Tuesday after the Institute for Supply Management said U.S. manufacturing activity fell last month to its lowest level in more than 10 years.
The weak data sent the major indexes tumbling on Tuesday, the first day of the fourth quarter. The Dow dropped more than 300 points while the S&P 500 slid 1.2%, their biggest one-day drops since Aug. 23.
“The market might be getting a little ahead of itself,” said Sam Stovall, chief investment strategist at CFRA Research. “We have to be reminded that manufacturing represents about 10% of our economy while services represents about 90%. The services side is strongly in expansionary mode.”
“You can’t just ignore this, but you have to take it with a grain of salt,” Stovall added.
Those losses were enough to wipe out the Dow and S&P 500′s gains for the entire third quarter. Both indexes gained 1.2% in the previous quarter.
Nicholas Colas, co-founder of DataTrek Research, said the market will “want to see real progress” from the upcoming U.S.-China trade talks after the disappointing data. “Markets will be looking for positive commentary from both sides going into this meeting and tangible steps to an agreement immediately after,” he said in a note.
Chinese and U.S. officials are scheduled to meet in Washington next week. Both sides have been in a trade war since last year that has rattled investor sentiment and economic growth expectations.
Wall Street’s focus remained on the economic data as private payrolls growth slowed down in September, according to a report from ADP and Moody’s Analytics. Payrolls increased by 135,000 in September, a drop from 157,000 in August. The gains from August also reflected a downward revision of nearly 40,000 payrolls.
The data from ADP and Moody’s Analytics is seen by investors as a preview to the government’s monthly jobs report, which will be released Friday at 8:30 a.m. ET.