UKX FTSE 100 Index

By Max Bernhard and Paul Vigna 

U.S. stocks fell Wednesday, following the path of shares overseas, as the latest payroll figures further stoked concerns about the economy.

The Dow Jones Industrial Average fell 313 points, or 1.2%, while the S&P 500 dropped 1.2% and the Nasdaq Composite lost 1.3%.

The ADP National Employment Report on Wednesday beat muted expectations -- the private sector added 135,000 jobs in September, above expectations. But the firm cut its August estimate by nearly 40,000, and the three-month average of 145,000 is down from 214,000 a year ago.

Altogether, it is the latest sign that businesses are turning more cautious in the face of a weakening global economy.

Markets overseas continued to react to disappointing economic data. The Stoxx Europe 600 was down 1.9%, with Germany's DAX 1.7% lower and the U.K.'s FTSE 100 down 2.5%.

Germany's leading economics research institutes jointly lowered their growth forecasts Wednesday for Europe's largest economy. They cited slowing global demand for capital goods, structural changes in the auto sector -- one of Germany's most important industries -- and political uncertainty.

"There hasn't been a single month this year where Germany has seen expansion in its manufacturing sector," said Michael Hewson, chief market analyst at CMC Markets, who expects the weakness in manufacturing to spill over into the services sector.

That focus was picked up in the U.S. The materials and industrials sectors in the S&P 500 both slumped about 1%. Dow dropped 3.4%, LyondellBassell Industries fell 3.5% and Flowserve lost 2.5%.

If the manufacturing slowdown spreads to the still robust service sector, this would increase pressure on the Federal Reserve to cut rates again in October, said Stefan Schilbe, HSBC Germany's chief economist. The ISM services sector report is due Thursday.

The market odds of a Fed rate cut in October rose to 72% Wednesday morning, up from 53% a week ago, according to data from CME's FedWatch tracker.

U.K. stocks were among the hardest hit in Europe. That was despite a weaker pound, which usually benefits FTSE 100 listed companies, many of which derive a majority of their earnings abroad. The pound fell 0.3% to $1.227.

Prime Minister Boris Johnson presented his latest Brexit proposal and warned he is still prepared to take the U.K. out of the EU at the end of October without a deal.

In Asia, Korea's Kospi was down nearly 2% following news that North Korea fired at least one missile off its east coast. The move, seen as a show of strength, came after Pyongyang said it would resume official nuclear talks with the U.S.

In Japan, the Nikkei fell 0.5% and Hong Kong's Hang Seng was down 0.2%. Mainland Chinese stock markets were closed for a holiday.

In commodities, Brent crude slipped 0.4% to $58.63 a barrel.

The yield on U.S. 10-year Treasurys was slightly lower at 1.618%, from 1.638% Tuesday. Bond yields and prices move in opposite directions.

Write to Max Bernhard at Max.Bernhard@dowjones.com and Paul Vigna at paul.vigna@wsj.com

(END) Dow Jones Newswires

October 02, 2019 10:09 ET (14:09 GMT)

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