By Riva Gold and Corrie Driebusch
U.S. stocks resumed their slide Friday as disappointing economic
data from China and the eurozone sparked a retreat by wary
investors and traders who were hesitant to enter the weekend with
big bets.
The steep drop at the end of the week has become a pattern: The
Dow Jones Industrial Average's fall of more than 1.6% Friday would
mark its third-steepest drop this month. The other two declines
also came a day before the stock market was set to be closed.
Investors and traders say they are uneasy entering the weekend
with large bets on the stocks in such volatile times. Adding to
that discomfort: the frequent geopolitical developments over
weekends when stock markets are closed.
"We have a political machine that's able to communicate any time
of the day," said Andrew Slimmon, senior portfolio manager with
Morgan Stanley Investment Management. "Who wants to take the risk
that something comes up and you're long?"
The Dow Jones Industrial Average declined 420 points to 24178,
and the S&P 500 fell 1.3%. The Nasdaq Composite dropped 1.2%.
With those losses, the Dow industrials and S&P 500 are on track
to end the week lower, while the Nasdaq Composite is still on pace
to end the week with a gain of about 1%.
The declines, led by technology and other companies closely
linked to the Chinese and global economy, signaled the weekslong
choppiness in markets around the globe isn't over, despite a slight
reprieve earlier in the week.
"It's been hard to avoid the damage in the markets the past
couple weeks, " said Matthew Forester, chief investment officer at
BNY Mellon's Lockwood Advisors. He said he has been favoring bonds
with higher credit quality and longer durations, but it has been
trickier to shift his stock holdings due to the all-inclusive
nature of the selling.
Friday's losses followed a similar pattern, with real-estate and
utilities shares posting smaller declines than other sectors. They
tend to be favored by investors in volatile times for their steady
payouts.
Health-care companies were among the worst performers as Johnson
& Johnson slumped nearly 9% after Reuters reported the company
knew for years that its baby powder sometimes contained asbestos.
The drop took about 80 points off the Dow industrials and pushed
the S&P's health-care sector down 3%.
Energy stocks in the S&P 500 declined 1.7% as oil prices
resumed their slide. U.S. crude dropped 2.7% to $51.18 a
barrel.
Friday's selling came as data showed China's economic downturn
deepened last month more than economists expected, as Beijing works
to halt a slowdown while grappling with a trade conflict.
Official figures showed a November slowdown in industrial
production amid issues among auto makers and property markets,
while growth in retail sales dropped to its lowest level in more
than 15 years.
"For a while, the Chinese economy was the extra bit that kept
the global total going," said Alastair Winter, chief economist at
Daniel Stewart & Co. "I do think the Chinese economy is slowing
quite a lot," he added, noting that is one reason Germany's
benchmark DAX index in total return terms is down more than 20%
from its peak in January.
Mao Shengyong, a spokesman for China's National Bureau of
Statistics, said China's economic growth was nonetheless on track
to achieve its annual target in 2018.
Hong Kong's Hang Seng Index fell 1.6%, while the Nikkei Stock
Average lost 2%. Declines spread to European markets, where the
Stoxx Europe 600 lost 0.5%.
Adding to the downbeat tone Friday, purchasing managers' surveys
separately showed that French business activity unexpectedly
contracted for the first time in 2 1/2 years, according to IHS
Markit, while German's composite purchasing managers index reached
its lowest level in four years.
That came a day after the European Central Bank cut its economic
growth forecasts, highlighting the climate of uncertainty around
trade tensions and market volatility.
Worries about world growth and trade relations have contributed
to steep swings in stock and bonds markets recently, even as the
U.S. economy has been relatively steady.
The concerns have sparked a broad retreat from risky assets. In
the week through Wednesday, investors withdrew record amounts from
global equity funds, according to EPFR Global.
Friday's moves came after world stocks had rebounded earlier
this week as The Wall Street Journal reported that China was set to
introduce an industrial policy that is friendlier to foreign
businesses. President Trump said on Twitter earlier in the week
that "productive" trade talks were under way.
"Markets are behaving as if everything depends on U.S.-China
trade," said Yogi Dewan, chief executive at Hassium Asset
Management.
Many economists expect the trade conflict to continue despite a
90-day tariff truce that Mr. Trump and his Chinese counterpart, Xi
Jinping, reached in early December.
Write to Riva Gold at riva.gold@wsj.com and Corrie Driebusch at
corrie.driebusch@wsj.com
(END) Dow Jones Newswires
December 14, 2018 13:34 ET (18:34 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.