U.S. stocks extended their decline on Tuesday, dragging the S&P 500 to a three-week low as energy shares weakened with oil and retailers including Target and Kohl’s fell after disappointing earnings and forecasts.
The selloff pushed the S&P 500 and the Dow Jones Industrial Average into negative territory for 2018. The Nasdaq Composite dropped to its lowest level in more than seven months.
By the close, the Dow Jones Industrial Average was unofficially down 2.22 percent, the S&P 500 had fallen 1.82 percent and the Nasdaq Composite was last off 1.67 percent.
Market participants said the move reflected a broader reassessment of risk heading into 2019, with concerns building around slower global growth, Federal Reserve policy and trade tensions between the United States and China.
Mark Kepner, an equity trader at Themis Trading in Chatham, New Jersey, said investors were looking past a strong earnings season and focusing instead on whether the economy could slow further next year. He said the question was whether the rest of the world would catch up with the United States or whether U.S. markets would begin to resemble weaker global peers.
Quincy Krosby, chief market strategist at Prudential Financial in Newark, New Jersey, said the market was adjusting to an early 2019 outlook shaped by mounting worries over global growth, the Federal Reserve’s rate path and tariffs. She said those pressures were forcing investors to reprice stocks at lower valuations.
Robert Pavlik, chief investment strategist and senior portfolio manager at SlateStone Wealth LLC in New York, said several concerns were converging at once and pushing investors out of the broader market. He described the selling as a reaction that built after the initial wave of bad news.
Matthew Keator, partner at The Keator Group in Lenox, Massachusetts, said uncertainty around the Fed and trade was feeding fear in the market. He added that lighter trading during a holiday week could exaggerate moves in either direction.
Doug Biben, founder and portfolio manager at BCM in Los Angeles, said investors were reacting to a cluster of negative headlines, including Boeing cancelling its conference call and Goldman Sachs downgrading Apple. He said margin calls in FANG stocks were also weighing on shares, though he said a later recovery in technology stocks would not be surprising once forced selling eased.
Michael O’Rourke, chief market strategist at JonesTrading in Greenwich, Connecticut, said the trade war, fading tax-cut stimulus and Federal Reserve normalization were leaving markets with few positive catalysts. He said fourth-quarter guidance from companies had come in below expectations, especially among retailers and large-cap technology names such as Amazon, Apple and Facebook, prompting investors to take profits and reduce risk before year-end.
O’Rourke also said weakness in the corporate bond market was part of the same de-risking trend, as rising rates and softer earnings expectations began to push investors toward a higher risk premium.
Eric Kuby, chief investment officer at North Star Investment Management Corp in Chicago, said the market’s upward momentum had already been broken in September after back-to-back tariff moves on Sept. 24 and the Federal Reserve’s decision on Sept. 26 to remove the word “accommodative” from its policy statement. He said the latest decline was tied in part to Apple’s guidance and then to retailer warnings that suggested a slowing economy.
Kuby said rising interest rates, trade-related disruptions and weak housing data were adding to evidence that the economy was softening, which could lead to further earnings cuts. He also said momentum-driven trading had turned against the market and that widening high-yield bond spreads were another sign of risk aversion.
Reuters reported the market move from New York.
