Stocks close lower as U.S.-China trade war fears reignite

Stocks close lower as U.S.-China trade war fears reignite

Twitter shares tumble on downbeat outlook

U.S. stocks closed lower Thursday, with the Dow Jones Industrial Average falling as much as 390 points at its low, as investors focused on U.S.-China trade tensions, highlighting widespread worries over slower global economic growth.

How did major indexes fare?

The Dow DJIA, -0.87% slid 220.77 points, or 0.9%, to 25,169.53, while the S&P 500 SPX, -0.94% retreated 25.56 points, or 0.9%, to 2,706.05. The Nasdaq Composite Index COMP, -1.18% fell 86.93 points, or 1.2%, to 7,288.35.

What drove the market?

Trade-war jitters resurfaced after National Economic Council Director Larry Kudlow said during an interview with Fox Business Network that there is still a long way to go before the U.S. will strike a trade deal with China. Previous talks covered “a tremendous amount of ground” but enforcement will be the key, he said.

CNBC also reported that a meeting between President Donald Trump and China’s Xi Jinping isn’t likely before a March 1 deadline, but the U.S. is likely to keep tariffs at 10% rather than raise them to 25% as scheduled.

A round of weak data from the European Union underscored concerns that slowing growth in China has impacted Europe, fueling concerns about a slowing global economy.

German industrial production unexpectedly fell by 0.4% in December from the month before, reinforcing concerns over the health of the eurozone’s largest economy. Meanwhile, the European Commission cut its growth forecast for the shared currency bloc Thursday, predicting that the 19-member eurozone will collectively grow by just 1.3% this year, down from the 1.9% forecast in November.

Meanwhile, investors continue to digest quarterly earnings, with U.S. corporations turning in mixed results as highlighted by Chipotle Mexican Grill Inc. and Twitter Inc.

Federal Reserve Chairman Jerome Powell, in a town hall appearance Wednesday night, said his goal was for the central bank to earn the public’s trust. The comments came as the Fed chief faced criticism for his dinner on Monday with Trump, which some said gave the appearance of White House influence over policy as it came soon after the central bank unexpectedly shifted to a more dovish stance.

The number of Americans applying for jobless benefits fell in the week ended Feb. 2 by 19,000 to 234,000, above economists’ expectations of 225,000 per a MarketWatch poll, but near historic lows.

What were analysts saying?

“The excuse for today’s correction appears to be related to U.S.-China trade talks, but to me the bigger factor is that many of the forces which have been driving the market rebound in recent weeks — investors getting back on the bandwagon, the Fed shift from hawkish to neutral, and the adjustment of expectations following the initial wave of earnings reports — have run their course and investors appear to be waiting for the next big mover,” said Colin Cieszynski, chief market strategist at SIA Wealth Management.

Cieszynski predicted the S&P 500 will move in a range of 2,600 to 2,800 in the near term with volatility rising on uncertainty over a possible second government shutdown, U.S.-China trade and Brexit.

“[The] market is down on reports that Trump and Xi will not be able to meet before the March 1st tariff deadline. This should not come as a surprise — the deadline is too close for the U.S. and China to work out details since so little has been accomplished thus far,” said Kristina Hooper, chief global market strategist at Invesco, in emailed comments.

“The overwhelming risk concern is slowing global economic growth,” Matthew Forester, chief investment officer of BNY Mellon’s Lockwood Advisors, told MarketWatch. “Recent data particularly from Germany, and Europe more broadly, are worrying investors,” he said.

“We’ve also seen central banks around the world begin to cut rates and lower their growth forecasts,” he added. “There’s concern that this will cause a slowdown in the U.S., though we haven’t seen evidence of that yet.”

What stocks were in focus?

In deal news, SunTrust Banks Inc. STI, +10.18% and BB&T Corp. BB, -2.53% announced they will combine in an all-stock merger valued at around $66 billion, creating the sixth-largest U.S. bank based on assets and deposits. SunTrust shares rallied 10% while BB&T shares advanced 4%.

Shares of Chipotle Mexican Grill CMG, +11.35% soared 11% after the restaurant chain reported adjusted quarterly earnings above expectations.

Shares of Twitter TWTR, -9.84% skidded 9.8% after the firm issued a downbeat outlook for the current quarter, while announcing it would stop reporting the monthly average user metric.

Spectrum Brands Holdings Inc. SPB, -17.67% slumped 18% after the parent of George Foreman and Remington brands reported a net loss for the quarter ended Dec. 30.

Shares of Cardinal Health Inc. CAH, +6.81% advanced 6.8% after the pharmaceutical and medical-device provider raised its full-year 2019 guidance.

T-Mobile US Inc. TMUS, +2.00% rose 2% after the firm reported better-than-expected fourth-quarter profit, though services revenue missed forecasts.

Philip Morris International Inc. PM, +1.62% shares gained 1.6% after the company reported fourth-quarter earnings and revenue that beat expectations.

Shares of Hanesbrands Inc. HBI, +20.17% jumped 20% after the apparel maker reported fourth-quarter earnings and profit above Wall Street expectations.

How did other markets trade?

Japanese stocks ended the day weaker, with the Nikkei 225 NIK, -2.01% closing the day 0.6% lower. Markets in Hong Kong and China were closed for the Lunar New Year holiday.

In Europe, stocks were under pressure with the Stoxx Europe 600 SXXP, -1.49% down more than 1%.

Crude oil CLH9, -0.74% slumped while gold GCH9, -0.08% settled mostly unchanged. The U.S. dollar DXY, +0.00% was firmer, compared with a basket of currencies of U.S. trading partners.

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