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U.S. Stocks Waver After Retail Sales Unexpectedly Fall

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10/16/2019 | 11:37am EST

By Will Horner and Paul Vigna

U.S. stocks swung between small gains and losses Wednesday as economic data suggested consumers were holding back on spending in the face of trade tensions and a global economic slowdown.

The Dow Jones Industrial Average fell 17 points, or less than 0.1%. The S&P 500 slipped 0.1%. The Nasdaq Composite lost 0.2%. Global stocks, meanwhile, wavered as concerns lingered over Brexit talks and the prospect of a U.S.-China trade deal.

Data from the Commerce Department Wednesday showed that U.S. retail sales slipped 0.3% in September, missing the expectations of economists polled by The Wall Street Journal who had predicted a 0.2% increase.

That further fueled anxiety about growth in the U.S. and overseas. The International Monetary Fund this week cut its global GDP forecast for 2019 to just 3%, its lowest level since the 2008 financial crisis, citing trade tensions and geopolitics. It projected 3.4% growth in 2020.

"Right now, you're not getting any relief from this trade war," said Edward Moya, an analyst at forex brokerage Oanda. "Until there is something that is signed and something the market believes is achievable, you're not going to see any forecasts have any upgrades."

Investors continue to scrutinize the details of the "phase one" trade deal reached between the U.S. and China last week. Despite a Chinese promise to buy more U.S. farm products, questions remain over how much, the time frame for purchases, and what the U.S. might have to give in return. The U.S. still plans to impose new 15% tariffs on $156 billion in consumer goods starting Dec. 15.

The uncertainty over the trade war, and even central bank policies makes it harder for companies to plan ahead.

"That could be the transmission channel in which the slowdown intensifies," said Ben May, the director of global macro research at Oxford Economics.

Despite those worries, major U.S. stock indexes remain near all-time highs. Investors will look to corporate earnings for new drivers.

Bank of America shares rose 2.3% as the bank reported gains in its consumer, wealth and commercial businesses. PNC Financial Services Group, Bank of New York Mellon and U.S. Bancorp also rose after reporting results.

IBM and Netflix will also report their third-quarter earnings after markets close in the U.S.

In other corporate news, shares of McKesson, AmerisourceBergen and Cardinal Health rallied after The Wall Street Journal reported they were in talks to settle opioid crisis litigation. Shares in McKesson rose 6.6%, AmerisourceBergen rose 5.1%, and Cardinal Health rose 4.6%.

U.S. crude oil added 1%, gold gained 0.3%, and the yield on the U.S. 10-year Treasury note fell to 1.76% from 1.77% on Tuesday.

Overseas, the pan-continental Stoxx Europe 600 index edged 0.2% lower as talks toward a draft plan for Britain to leave the European Union continued. Investors had been anticipating positive news to emerge overnight but were disappointed by a lack of progress Wednesday, said Peter Dixon, a senior economist at Commerzbank.

"We were told there would be a deadline of midnight last night; both sides sounded very positive. Then we woke up and it was still a work in progress and I think that has changed investors' perceptions of where we are," he said.

Even if a deal is reached, questions remained about whether the British Parliament will back it, others cautioned.

"It does look like there is progress but there are hurdles to get something agreed with the EU and then it will be difficult to get it through Parliament," said Christopher Peel, chief investment officer at Tavistock Investments.

The British pound, which had hit a four-month high against the U.S. dollar a day earlier, was flat, while the FTSE 100 gauge for U.K. equities slipped 0.5%.

Chinese stocks edged lower on concerns that tensions with the U.S. over the Hong Kong protests would make striking a trade deal more complicated.

The Shanghai Composite Index fell 0.4% after the U.S. House of Representatives passed a series of bills backing pro-democracy protesters in Hong Kong, drawing a strong rebuke from China. A Chinese Foreign Ministry spokesman warned the U.S. against meddling in Chinese affairs and said the bill would damage relations between the two nations.

The development may complicate efforts to reach a trade agreement, analysts said.

"We got sideswiped by those headlines from China," said Stephen Innes, a market strategist for currency broker AxiTrader in Bangkok. "I'm not sure much is going to actually come from it, but it's just another thing to deal with."

Write to Paul Vigna at paul.vigna@wsj.com

Stocks mentioned in the article
ChangeLast1st jan.
BANK OF NEW YORK MELLON CORPORATION (THE) -0.32% 48.845 Delayed Quote.3.44%
CHINA-SHANGHAI COMP -0.78% 2911.05 End-of-day quote.16.54%
DJ INDUSTRIAL -0.15% 27776.48 Delayed Quote.19.75%
FTSE 100 INDEX 0.28% 7234.11 End-of-day quote.0.00%
NASDAQ 100 -0.37% 8254.699814 Delayed Quote.31.73%
NASDAQ COMP. -0.35% 8498.4509 Delayed Quote.29.17%
S&P 500 -0.18% 3103.09 Delayed Quote.24.00%
WALGREENS BOOTS ALLIANCE -0.62% 60.95 Delayed Quote.-10.23%
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