By Chris Matthews and Barbara Kollmeyer, MarketWatch

Johnson&Johnson falls over 10% to pace Dow decliners

U.S. stocks were down sharply Friday afternoon, trading near session lows, 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 542 points, or 2.2%, to 24,055, while the S&P 500 index dropped 54 points, or 2%, to 2,597. The Nasdaq Composite Index fell 157 points, or 2.2% to 6,915.

A close below 24,145.55 would push the Dow into correction territory, defined as a drop of more than 10% from a recent peak, joining the S&P 500 and Nasdaq.

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?

Johnson & Johnson(JNJ) stock was the Dow's biggest loser Friday, tumbling more than 10%, after a Reuters report alleged the company (http://www.marketwatch.com/story/johnson-johnson-stock-slammed-by-report-it-knew-of-asbestos-in-baby-powder-2018-12-14) knew for decades that its baby talcum powder was sometimes contaminated with the carcinogen asbestos.

Shares of Costco Wholesale Corp. (COST) were down 8.5%, after a Thursday evening earnings release showed the retailer missed revenue expectations for the fiscal first quarter.

Adobe Inc. (ADBE) stock fell 6.5%, 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 2.9%

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 12.6%, after falling more than 26% during trade Thursday.

Sealed Air Corp. (SEE) stock was up 4.1%, after the company approved a restructuring plan.

What did data say?

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?

Karyn Cavanaugh, senior market strategist with Voya Investment Management told MarketWatch that disappointing economic data out of China was the biggest driver of Friday's losses. "The Chinese data was a dirt sandwich, not because it showed deceleration in the Chinese economy, but because it's showing that all the stimulus they've done can't turn it around."

She argued that the losses snowballed throughout the day because "people are worried that we will reach technical indicators" that could trigger a bout of algorithmic selling.

"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."

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 maalso seeped in red (http://www.marketwatch.com/story/china-slowdown-brexit-grind-pulls-uk-stock-markets-lower-2018-12-14).

Crude prices ended lower (http://www.marketwatch.com/story/oil-falls-as-stock-weakness-and-dollar-strength-dull-impact-of-bullish-supply-data-2018-12-14), with gold slipping and the U.S. dollar (http://www.marketwatch.com/story/dollar-boosted-by-haven-flows-as-china-eurozone-data-heighten-global-growth-worries-2018-12-14) rising.

(END) Dow Jones Newswires

December 14, 2018 15:43 ET (20:43 GMT)