By Chris Matthews and Barbara Kollmeyer, MarketWatch

Hong Kong stocks drop over 2%

U.S. stocks fell sharply at the start of trade Friday, as investors focused on a batch of weaker-than-expected economic data out of China and Europe, sparking fresh worries about the state of the world's second-biggest economy and prospects for global growth.

How are the benchmarks trading?

The Dow Jones Industrial Average fell 200 points, or 0.8%, to 24,397., while the S&P 500 index dropped 23 points, or 0.9%, to 2,627. The Nasdaq Composite Index fell 86 points, or 1.2%, to 6,984.

As of early Friday, the Dow is now on pace to fall 0.1% for the week, the S&P 500 to decline 0.3%, with the Nasdaq set to eke out a 0.2% advance.

Read:Here's why frustrated stock-market traders say 'neither bulls nor bears' are in charge (http://www.marketwatch.com/story/stock-markets-repeated-reversals-show-neither-bulls-nor-bears-are-in-charge-2018-12-13)

(http://www.marketwatch.com/story/stock-markets-repeated-reversals-show-neither-bulls-nor-bears-are-in-charge-2018-12-13)And:'People are underinvested' and they're going to miss out, warns Wall Street vet (http://www.marketwatch.com/story/people-are-underinvested-and-theyre-going-to-miss-out-warns-wall-street-vet-2018-12-13)

What's driving the market?

Fresh evidence that global trade tensions are hitting the world's second-biggest economy emerged Friday, as China released data (http://www.marketwatch.com/story/china-economic-activity-mostly-slowed-in-november-2018-12-14) that showed both industrial output and retail sales for November missed economists' forecasts. China's National Bureau of Statistics (http://www.stats.gov.cn/english/PressRelease/201812/t20181214_1639530.html) attempted to cool concerns, saying the economy "performed within the reasonable range."

However, those words appeared to fall on deaf ears as investors continued to push aside trade optimism, and instead focused on collateral damage from the back and forth. Investors have been weighing several pieces of news over the past few days showing that trade tensions between the U.S. and China may be cooling, with optimism driving investors into equities.

Economic data out of Europe was no more encouraging, after IHS Markit's purchasing manager's index, released Friday, showed the German and French private sectors (http://www.marketwatch.com/story/french-german-pmi-data-underwhelms-2018-12-14) slowing sharply in November.

The effect of these data may be tempered by news of actual changes to Chinese trade policy as a result of the U.S.-China negotiations. China's Ministry of Finance announced Friday (https://www.reuters.com/article/us-china-usa-auto/china-says-to-suspend-additional-tariffs-on-u-s-made-cars-from-january-1-idUSKBN1OD165) that it would suspend a series of tariffs on American-made automobiles and parts for three months starting Jan. 1, according to Reuters. This follows one day after China's first major purchase (https://www.bbc.com/news/business-46562384) of U.S. soybeans since it raised tariffs on the legumes in July.

Investors, meanwhile, appeared to take little solace in strong U.S. retail sales data.

What stocks are in focus?

Shares of Costco Wholesale Corp. (COST) were down 5.2%, after a Thursday-evening earnings release showed the retailer missed revenue expectations for the fiscal first quarter.

Adobe Inc. (ADBE) stock fell 6%, after the software company missed earnings expectations (http://www.marketwatch.com/story/adobe-stock-wobbles-as-earnings-miss-revenue-beats-2018-12-13) for the fourth quarter.

Shares of Starbucks Corp. (SBUX) were in focus Friday, following its investor day Thursday, when the company announced ambitious plans for expansion in China, as well as a plan to return $25 billion to shareholders between now and 2020. The stock was down 4%

XPO Logistics(XPO) stock was in focus after the release of a short seller report (https://www.barrons.com/articles/xpo-stock-hit-by-short-sellers-report-51544726996) on Thursday that accused the company of hiding poor returns with aggressive accounting tactics. Thursday evening, the company responded (http://www.marketwatch.com/press-release/xpo-logistics-responds-to-todays-misleading-report-from-a-short-selling-firm-2018-12-13) to the report, accusing it being "intentionally misleading." The stock rose 6.2%, after falling more than 26% during trade Thursday.

Sealed Air Corp. (SEE) stock was up 6.4%, after the company approved a restructuring plan.

What data are ahead?

Retail sales rose 0.2% in November from the month previous (http://www.marketwatch.com/story/us-retail-sales-off-to-good-start-as-the-holiday-season-gets-underway-2018-12-14), surpassing expectations of a 0.1% jump, according to a MarketWatch poll of economists.

U.S. industrial production rose 0.6% in November versus consensus expectations of 0.4% (http://www.marketwatch.com/story/industrial-output-up-06-in-november-on-mining-and-utilities-but-factories-sputter-2018-12-14), per a MarketWatch poll. Capacity utilization rose ten basis points to 78.5% from October, below estimates of 78.6%.

At 10:15 a.m., investors will receive initial readings IHS Markit's purchasing managers indexes for both the manufacturing and services sectors.

What are analysts saying?

"Global markets...are once again in risk-off mode," wrote Joel Kulina, analyst at Wedbush Securities in a note. "Price action and sentiment remain poor--investors are simply trying to limit performance damage rather than reach for outperformance."

"Indeed, investors are right to be worried about global growth as China economy continues to sputter," said Stephen Innes, head of Asia-Pacific trading at Oanda, in a note to clients. "The data lend support to the market's view that things will get worse in China before they get better, this despite investment rising."

What did the benchmarks trade yesterday?

On Thursday, the Dow Jones Industrial Average finished up 70.11 points, or 0.3%, 24,597.38, after rallying more than 200 points at the session high. The S&P 500 index edged down slightly to 2,650.54 and the Nasdaq Composite Index finished down 0.4%.

How are other markets trading?

(http://www.marketwatch.com/story/asia-stocks-rally-into-a-second-day-with-hong-kong-markets-in-the-lead-2018-12-12)In Asia, Hong Kong's Hang Seng Index dropped 1.6% (http://www.marketwatch.com/story/asia-stocks-take-a-hit-from-economic-data-early-friday-following-2-days-of-gains-2018-12-13), while the Nikkei 225 index fell 2%, not helped after a cautious business outlook (http://www.marketwatch.com/story/japan-big-manufacturers-business-outlook-cautious-2018-12-14) from big manufacturers in Japan. (http://www.marketwatch.com/story/asia-stocks-rally-into-a-second-day-with-hong-kong-markets-in-the-lead-2018-12-12)Europe stocks were also seeped in red.

Crude prices were under pressure, with gold slipping and the U.S. dollar rising.

(END) Dow Jones Newswires

December 14, 2018 10:05 ET (15:05 GMT)

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