By Chris Matthews and Barbara Kollmeyer, MarketWatch
Hong Kong stocks drop over 2%
U.S. stocks were down sharply midday 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 450 points, or 1.8%, to
24,152., while the S&P 500 index dropped 40 points, or 1.5%, to
2,610. The Nasdaq Composite Index fell 94 points, or 1.3%, to
6,975.
As of midday Friday, the Dow is now on pace to fall 1% for the
week, the S&P 500 to decline 0.9%, with the Nasdaq set to be
virtually unchanged.
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. Meanwhile, purchasing managers index
readings for the U.S. manufacturing and services sectors fell to
multimonth lows, showing activity was still expanding but at a
slower pace.
What stocks are in focus?
Shares of Costco Wholesale Corp. (COST) were down 8.2%, after a
Thursday evening earnings release showed the retailer missed
revenue expectations for the fiscal first quarter.
Adobe Inc. (ADBE) stock fell 5.8%, 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
3.2%
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 13.5%, after falling more than 26% during trade
Thursday.
Sealed Air Corp. (SEE) stock was up 4.4%, 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%.
The U.S. purchasing managers index for the manufacturing sector
fell to a 13-month low of 53.9 in December,
(http://www.marketwatch.com/story/businesses-wary-as-pmi-readings-fall-to-multi-year-lows-across-the-globe-2018-12-14)
while the services sector survey fell to an 11-month low of 53.4. A
reading of more than 50 indicates an expansion in activity.
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 12:06 ET (17:06 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.