All 11 major S&P sector indexes fell as employment and manufacturing data shook investor confidence in the strength of the domestic economy.
After employment and manufacturing data, released Tuesday, showed that the United Staes-China trade war is taking an increasing toll on the U.S. economy, Wall Street’s main indexes suffered their sharpest one-day declines in nearly six weeks Wednesday.
All 11 major S&P sector indexes fell, the S&P 500, which measures the stock performance of 500 large companies listed on stock exchanges in the United States, is now about five percent below its all-time high hit in July.
While the Dow Jones Industrial Average dropped 1.86 percent and the Nasdaq Composite fell 1.56 percent.
This came as the ADP National Employment Report showed private payrolls growth in August was not as strong as previously estimated, and said “businesses have turned more cautious in their hiring,” with small enterprises becoming “especially hesitant.”
While a report realeased Tuesday showed U.S. factory activity contracted to its lowest level in more than a decade. Although markets are waiting for U.S. Labor Department’s more comprehensive jobs report being released on Friday.
“The fact the manufacturing side of the economy in the U.S. and globally is doing badly shouldn’t come as a newsflash to anybody. But the extent of the miss yesterday is something that’s driven this two-day move,” said the head of U.S. Equity and Derivative Strategy at BNP Paribas, Greg Boutle.
The recent weak data shook investor confidence in the strength of the domestic economy, which despite inverted yield curves, has helped support Wall Street this year.
“If China buys less from us, we have less to manufacture, fewer orders to fill. This data is indicating we are not immune to this trade dispute, that it’s hurting us as well as China,” Chief Investment Strategist at CFRA Research Sam Stovall said.
U.S.-China trade talks will resume mid-October as the 13th round of negotiations is aimed to end to the tit-for-tat trade war that has shocked global markets and economic projections for months.
Trade-deputies set up the ground for the ministerial-level negotiations during September, as both countries made conciliatory gestures ahead of the next round of talks, but a deal remains elusive.
The Chinese government announced it will exempt some U.S. goods from its tariffs, which covers two lists with 16 categories of goods, and will be valid from Sept. 17, 2019, to Sept. 16, 2020, the Customs Tariff Commission of the State Council said in a statement.
The products include soybeans, some anti-cancer drugs, and lubricants, as well as animal feed ingredients whey and fish meal. Some of the categories will apply for refunds of levied duties within six months, granting an enormous break, especially to U.S. farmers.
Back on Sept. 11, U.S. President Donald Trump welcomed China’s decision calling it a “big move” by Beijing and a positive gesture before trade negotiators from both countries meet in Washington.
Trump tweeted that the U.S. will delay increasing tariffs on US$250 billion worth of Chinese imports from Oct. 1 to Oct. 15 “as a gesture of goodwill.” The tariffs were set to increase to 30 from 25 percent on the goods.