Dow drops 120 points after weak economy in services, boosting gloomy fourth quarter start
Stocks fell on Thursday following the release of disappointing economic data that fueled Wall Street fears for the global economy.
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The Dow Jones Industrial Average fell trading 120 points lower, or 0.9%. The S&P 500 slipped 0.3%, while the Nasdaq Composite also slid 0.3%. The most important averages fell short by more than 1% before recovering any of the losses.
Thursday's loss brought Dow's three-day decline to nearly 1,000 points, contributing to Street's dismal start to the fourth quarter.
The financial sector was the biggest downturn in the S&P 500, sliding 0.8%. Technically related stocks such as Netflix and Amazon fell 2.6% and 0.8% respectively. Apple also lost 1.1%.
The Institute for Supply Management said that the reading of the US service sector fell last month to its lowest level since August 2016. The ISM index for non-production came in at 52.6 for September. Economists polled by Dow Jones expected a print of 55.3.
Investors rushed to buy assets such as Safe Treasureys and gold after the release. The 10-year government rate fell to 1.53% from about 1.6% earlier in the day. Gold futures jumped 0.7% to trade at $ 1,518 an ounce.
Earlier this week, ISM published its weakest reading in the industrial sector in more than 10 years, raising fears of an economic downturn.
"The bottom line: Increased uncertainty threatens financial confidence after the September jump has run out of steam," Baird investment strategist Willie Delwiche said in a note. "The manufacturing sector continues to weaken, the CEO's confidence is at the lowest level in a decade and the pace of private sector job growth is slowing."
The weakness of the US industry raised concerns about the US-China trade war's impact on the economy. The conflict started last year. Since then, China and the United States have dropped billions of dollars of their products. Delegations from Washington and Beijing will meet next week in hopes of reaching agreement.
In other trade news, the White House plans to expand its combative trade policy with 10% tariffs on European-made Airbus aircraft and 25% duties on French wine, Scottish and Irish whiskey, along with cheese from across the continent.
The move comes after the World Trade Organization ruled in favor of the tariffs after years of quarrels over subsidies from European authorities to the aircraft manufacturer Airbus. The EU has indicated that it will retaliate against US tariffs.
The decline in stocks pushed the S&P 500 to below the 50-day and 100-day moving averages, two key technical levels that traders have looked at. Jeff Kilburg, CEO of KKM Financial, said the broad index remains "true to its 2019 technical behavior" and notes that it expects it to find support around the 200-day moving average.
