By Chris Matthews and Barbara Kollmeyer, MarketWatch
Johnson & Johnson falls over 10% to pace Dow decliners
Stocks fell sharply Friday, ending the week on a bleak note and
sending the Dow Jones Industrial Average into correction territory
after a batch of weaker-than-expected economic data out of China
and Europe sparked fresh worries about the state of the world's
second-biggest economy and prospects for global growth.
How did benchmarks trade?
The Dow fell 496.87 points, or 2%, to end at 24,100.51, for its
lowest close since May 3. The S&P 500 index shed 50.59 points,
or 1.9%, to close at 2,599.95, its lowest finish since April 2. The
Nasdaq Composite Index dropped 58.59 points, or 0.8%, to finish at
6,910.66, marking its lowest close since Nov. 20.
The drop left the Dow more than 10% below its Oct. 3 record
high, meeting the widely used definition of a correction. The
blue-chip gauge joined the S&P 500 and the Nasdaq in correction
territory.
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
multi-month lows, showing activity was still expanding but at a
slower pace.
What stocks are in focus?
The S&P 500 financial sector entered bear-market territory,
defined as a 20% pull back from a peak, with Friday's close,
according to Dow Jones Market Data.
Johnson & Johnson(JNJ) was the Dow's biggest loser Friday,
with shares tumbling 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. Johnson & Johnson
said the report was "one-sided, false and inflammatory." The
decline knocked around 100 points off the Dow.
Shares of Costco Wholesale Corp. (COST) fell 8.6%, after a
Thursday evening earnings release showed the retailer missed
revenue expectations for the fiscal first quarter.
Adobe Inc. (ADBE) stock fell more than 7%, 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 fell
2.3%
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. 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 nearly 16%, after falling more than 26% during trade
Thursday.
Sealed Air Corp. (SEE) stock rose 4.8%, 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 did other markets trade?
(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 16:46 ET (21:46 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.