By Paul J. Davies and Amrith Ramkumar
U.S. stocks fell Wednesday after downbeat economic data fueled fresh fears of slower growth in the world economy.
The Dow Jones Industrial Average declined 161 points, or 0.6%, to 25371 shortly after the opening bell. The S&P 500 fell 0.5%, dropping 4.3% below its April 30 record. It remains up 12% for the year. The tech-laden Nasdaq Composite dropped 0.6%.
Setbacks in U.S.-China trade relations have swung markets in recent days, with stocks rising and falling on shifting bets about the two sides eventually reaching an agreement. Many investors are worried about higher tariffs crimping economic and profit growth, leading to an uptick in volatility so far this month.
Those jitters have also increased focus on economic data points as analysts attempt to gauge whether a growth slowdown overseas will spread to the U.S. Data Wednesday showed U.S. retail sales fell unexpectedly in April even before the U.S. raised tariffs on $200 billion worth of Chinese imports and Beijing said it would raise levies on $60 billion of U.S. goods in response. U.S. manufacturing output also fell in April, missing expectations.
Figures also showed Chinese industrial production, retail sales and fixed-asset investment all slowed in April, the latest mixed data point concerning analysts who are uncertain how much stimulus measures will spur activity in the world's second-largest economy.
In one sign of heightened growth worries, bond yields slid with investors seeking safety in U.S. Treasurys. The yield on the benchmark 10-year U.S. Treasury note fell to 2.364%, according to Tradeweb, from 2.421% a day earlier and was on track to close at its lowest level since late in 2017. Bond yields fall as prices rise.
Still, some analysts expect an eventual trade deal and Chinese stimulus measures to boost the outlook for global growth moving forward. The Shanghai Composite rose 1.9% Wednesday following an upbeat session in the U.S. a day earlier, and Hong Kong's Hang Seng and Japan's Nikkei Stock Average also climbed.
Sebastien Galy, senior macro strategist at Nordea Asset Management, said investors in China seemed to react to the weak economic data by assuming that the government would bring more economic stimulus measures, sending stocks higher. The buying, he thought, was driven mainly by those who had been underinvested in the early part of the year.
"What seems to be happening is that many had missed the rally since December and were waiting to buy on a dip," he said. "With such a psychology, a shock that should be sizable seems to fade faster."
Some analysts are still bracing for more market swings ahead as investors get more economic data and trade signals.
Figures Wednesday showed Germany's economy expanded 0.4% in the first quarter, after Europe's largest economy narrowly avoided a recession late last year. Some analysts remain wary that a slowdown in business confidence around the world following the latest tariffs will hurt growth more in the future. The Stoxx Europe 600 edged down 0.6%.
Among individual stocks Wednesday, Macy's added 2.8% after the retailer posted stronger-than-expected sales growth in its latest quarter. Investors will also parse coming earnings from Walmart and other sellers of consumer goods for possible clues about how the companies plan to handle 25% tariffs on more than $40 billion of goods that are imported from China and directly purchased by U.S. consumers.
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