Stock indexes sank Monday after twin announcements highlighted how much China’s slowing economic growth is hurting profits for U.S. companies.
Caterpillar, a bellwether for industrial companies, reported fourth-quarter earnings that fell well short of analysts’ expectations and said that it expects construction-equipment sales growth in China to be flat in 2019 following years of significant growth. Chipmaker Nvidia, meanwhile, cited slowing demand in China as one of the reasons for slashing its forecast for fourth-quarter revenue.
Wall Street had already been fixated on the effects of China’s slowdown, particularly with trade tensions high between Washington and Beijing, and the announcements sent the technology and industrial sectors to sharp losses. They helped drag the S&P 500 down 20.91 points, or 0.8 percent, to 2,643.85.
The Dow Jones industrial average fell 208.98, or 0.8 percent, to 24,528.22, the Nasdaq composite lost 79.18, or 1.1 percent, to 7,085.68 and the Russell 2000 index of small-cap stocks dropped 9.32, or 0.6 percent, to 1,473.54.
China, the world’s second-largest economy, generated its slowest economic growth last year since 1990, and the impact is being felt widely among the many U.S. companies that rely on China for sales, especially industrial and technology companies. China accounts for 5.5 percent of all revenue for S&P 500 companies, second-most in the world after the United States, according to FactSet.
Nvidia and Caterpillar fell to the sharpest losses in the S&P 500, with drops of 13.8 percent and 9.1 percent, respectively.
Tech giants Microsoft and Apple were also weighed down by China concerns. Microsoft fell 2 percent, and Apple shed 0.9 percent. Apple shook markets earlier this month when it warned of lagging sales in China.
Talks aimed at resolving the impasse over Chinese technology policy and other issues are due to resume in Washington this week. The trade meeting is just one of several big events that could swing markets in a busy week. Also upcoming are a meeting by the Federal Reserve on interest rates, the U.S. jobs report and earnings reports from about a quarter of all the companies in the S&P 500 index.
In Europe, the threat of a continued economic slowdown has been hanging over what is an already contentious situation with Britain’s expected departure from the European Union in March. Economic growth in Europe slowed in the last half of 2018.
The British FTSE 100 lost 0.9 percent, while the French CAC 40 fell 0.8 percent and the German Dax lost 0.6 percent. In Asia, Japan’s Nikkei 225 index fell 0.6 percent. The Hang Seng in Hong Kong and South Korea’s Kospi were both virtually flat.
In the commodities market, U.S. crude oil fell 3.2 percent to settle at $51.99 per barrel in New York. Brent crude, used to price international oils, fell 2.8 percent to $59.93 per barrel.
The price of oil did not have a big reaction to the Trump administration imposing sanctions Monday on the state-owned oil company of Venezuela.
Wholesale gasoline fell 4.1 percent to $1.33 a gallon. Heating oil lost 2.9 percent to $1.84 a gallon and natural gas dropped 8.4 percent to $2.91 per 1,000 cubic feet.