By Sue Chang and Chris Matthews, MarketWatch
Longest partial government shutdown enters 32nd day
U.S. stocks closed lower Tuesday, snapping a four-day winning
streak, as trade woes and fresh concerns over the state of the
global economy greeted investors returning from the long holiday
weekend.
Earnings also remained in focus, with a busy week ahead.
How did the benchmarks fare?
The Dow Jones Industrial Average sank 301.87 points, or 1.2%, to
24,404.48, while the S&P 500 index dropped 37.81 points, or
1.4%, to 2,632.90. The Nasdaq Composite Index fell 136.87 points,
or 1.9%, to 7,020.36.
Read: Here's President Trump's stock-market scorecard after 2
years in office
(http://www.marketwatch.com/story/heres-president-trumps-stock-market-scorecard-after-2-years-in-office-2019-01-22)
What drove the market?
Stocks were battered by reports that U.S. officials turned down
an offer
(https://www.ft.com/content/466cc9e2-1e4c-11e9-b126-46fc3ad87c65)
by China to hold a preparatory meeting on trade negotiations due to
a lack of progress in areas including "forced" technological
transfers and economic reforms. However, the market trimmed its
losses late in the session after White House adviser Larry Kudlow
denied
(http://www.marketwatch.com/story/white-houses-kudlow-denies-report-that-china-meeting-was-cancelled-2019-01-22)
that the U.S. rejected China's overtures.
Meanwhile, if the U.S. formally requests the extradition of
Huawei's chief financial officer
(https://www.cnbc.com/2019/01/22/huawei-exec-meng-wanzhou-us-to-formally-seek-extradition-report-says.html),
Meng Wanzhou, from Canada over allegations she lied about the
company's dealings with Iran, negotiations with China could become
even more difficult.
On Monday, the International Monetary Fund cut its global growth
forecast to 3.5% for 2019 from 3.7% in 2018
(http://www.marketwatch.com/story/imf-cuts-world-economic-forecast-for-2019-citing-trade-tensions-2019-01-21)
and from the 3.7% it predicted for 2019 back in October. Unveiling
its forecasts at the World Economic Forum in Davos, Switzerland,
the fund left its prediction for U.S. growth this year unchanged at
2.5%.
Read:The investor known as the 'Warren Buffett of Boston'
rattles Davos crowd with this warning
(http://www.marketwatch.com/story/the-oracle-of-boston-rattles-davos-crowd-with-this-warning-for-investors-2019-01-22)
Investors are also digesting a fresh round of corporate earnings
and paying close attention to management commentary on the global
economic outlook. As of Friday, 11% of S&P 500 companies have
reported, according to FactSet, with 56% announcing earnings beats,
below the five-year average of 60%.
A partial government shutdown stretched into its 32nd day on
Tuesday, and there was little sign of the deadlock breaking.
Democrats rejected Trump's latest proposal
(http://www.marketwatch.com/story/democrats-dismiss-trumps-latest-plan-but-it-may-get-senate-vote-2019-01-20)
to temporarily extend protections for some young immigrants brought
to the country illegally as children, in exchange for $5.7 billion
for his border wall.
The shutdown has caused a backlog of economic data
(http://www.marketwatch.com/story/economy-is-hitting-more-turbulence-but-the-shutdown-leaves-investors-partly-in-the-dark-2019-01-19),
with only a smattering of reports due this week, including jobless
claims and Markit manufacturing and services purchasing managers
index data.
Existing-home sales fell to a seasonally adjusted annual rate of
4.99 million in December
(http://www.marketwatch.com/story/existing-home-sales-slide-to-a-3-year-low-as-housing-market-stumbles-2019-01-22),
their lowest in three years, according to the National Association
of Realtors.
Which stocks were in focus?
Arconic Inc. (ARNC) tumbled 16% after the maker of steel
products for the car and aerospace industries said it is no longer
pursuing a sale of the company
(http://www.marketwatch.com/story/arconic-shares-slide-27-premarket-after-company-says-no-longer-pursuing-a-sale-2019-01-22).
Shares of Johnson & Johnson (JNJ) fell 1.5% even after the
firm announced fourth-quarter results
(http://www.marketwatch.com/story/johnson-johnson-tops-estimates-for-fourth-quarter-2019-01-22)
that surpassed analysts' expectations for revenue and earnings.
Halliburton Co. (HAL) dropped 3.1% despite reporting
fourth-quarter profit and revenue
(http://www.marketwatch.com/story/halliburton-tops-profit-and-revenue-expectations-shares-slip-2019-01-22)
that beat Wall Street estimates.
Shares of Travelers Companies Inc. (TRV) were down 1.3% after
the insurer announced
(http://www.marketwatch.com/story/travelers-beats-earnings-estimates-despite-higher-catastrophe-losses-2019-01-22)
it beat analysts' estimates for both sales and earnings in the
fourth quarter.
Bunge Ltd. (BG) shares retreated 2.2% after the agriculture and
food-business company announced that its full-year earnings
(http://www.marketwatch.com/story/bunge-says-adjusted-ebit-to-be-hurt-by-china-trade-issues-lower-brazilian-ethanol-prices-2019-01-22)
would fall short of its previous guidance.
Stanley Black & Decker Inc. (SWK) shares skidded 16% after
the firm gave disappointing guidance for 2019
(http://www.marketwatch.com/story/stanley-black-decker-shares-fall-nearly-7-after-weak-2019-guidance-2019-01-22).
Shares of eBay Inc. (EBAY) rallied 6.1% after Elliot Management,
an activist hedge fund, issued a letter to eBay's management
(http://www.marketwatch.com/story/ebay-stock-soars-12-after-elliott-managment-suggests-plan-to-fix-prolonged-underperformance-2019-01-22)
laying out a five-step plan that Elliot said could lead to a
valuation of $55 to $63 a share by the end of 2020.
Read: Tech is ready to respond to Wall Street's doubts, but
don't expect a holiday miracle
(http://www.marketwatch.com/story/tech-companies-are-ready-to-respond-to-wall-streets-doubts-but-dont-expect-a-holiday-miracle-2019-01-17)
What were analysts saying?
Investors are digesting a lot of negative news, Michael
O'Rourke, chief market strategist at JonesTrading, told
MarketWatch.
"Traders are looking at headlines saying that the U.S. and China
aren't making progress on intellectual property, that China is
pushing ahead with its 'Made in China 2025' strategy," and that
global growth is continuing to slow, he said.
Meanwhile, "at Davos you have all these political and business
leaders talking about all the headwinds we're facing, so investors
are thinking now it's time to take a step back and see what happens
next," he said.
"Today's selloff is a result of the big move we had on Thursday
and Friday," said Ed Keon, chief investment strategist at QMA.
"Markets are trying to find the right level. We were too low on
Christmas Eve. We've had a substantial rebound, but it's not like
there aren't things that can go wrong or are going wrong," like a
slowing Chinese economy, he said.
Keon said that on balance, corporate executives' outlooks for
the coming year haven't been encouraging. "A number of executives
are guiding lower," he said, adding that analysts' estimates for
earnings growth for 2019 are also falling at a rapid rate of 1
percentage point per month.
"When analysts' forecasts are dropping like this, when they're
falling at 1 [percentage point] per month, they tend to keep
falling throughout the year."
How did other markets trade?
Trade and growth worries weighed on Asian markets
(http://www.marketwatch.com/story/asian-markets-slip-on-global-growth-worries-2019-01-21),
with the Shanghai Composite Index sliding 1.4%. In Europe, stocks
closed lower, with the Stoxx Europe 600 falling 0.4%.
Crude oil fell sharply
(http://www.marketwatch.com/story/oil-slumps-on-renewed-global-growth-fears-2019-01-22),
while gold settled mostly unchanged
(http://www.marketwatch.com/story/gold-struggles-to-regain-footing-despite-renewed-global-growth-worries-2019-01-22)
and the U.S. dollar traded flat
(http://www.marketwatch.com/story/dollar-muted-and-yen-stronger-in-risk-off-currency-trading-2019-01-22).
--Barbara Kollmeyer contributed to this report
(END) Dow Jones Newswires
January 22, 2019 16:42 ET (21:42 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.