Wall Street tumbles as trade war threatens U.S. economy

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© Reuters. Traders work on the floor at the NYSE in New York© Reuters. Traders work on the floor at the NYSE in New York

By Noel Randewich

(Reuters) – Wall Street’s main indexes were on track for their sharpest one-day declines in nearly six weeks on Wednesday after a report on private sector hiring suggested that fallout from the U.S.-China trade war is contaminating the U.S. economy.

All the 11 major S&P sector indexes were in the red, with technology (), materials () and energy () each down more than 2%.

The ADP (NASDAQ:) 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.”

That added to fears sparked on Tuesday when a report showed U.S. factory activity contracted to its lowest level in more than a decade.

The recent weak data has shaken investor faith in the strength of the domestic economy, which had shown relative resilience in the face of slowing global growth. Confidence in the U.S. economy 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,” said Sam Stovall, chief investment strategist at CFRA Research.

The focus is now on the Labor Department’s more comprehensive jobs report on Friday for further clues on the health of the U.S. economy.

The S&P 500 () and the Dow () slipped below their 100-day moving averages for the first time in about a month. Many investors believe that falling below such moving averages means the indexes are likely to fall further.

GRAPHIC: Wall Street’s main indexes hit ~1 month lows – https://tmsnrt.rs/2nJ2E3j

The S&P 500 is now about 5% below its all-time high hit in July after coming within striking distance of the mark two weeks ago.

At 2:38 p.m. ET, the Dow Jones Industrial Average () was down 1.85% at 26,082.02 points, while the S&P 500 () lost 1.78% to 2,887.9.

The Nasdaq Composite () dropped 1.65% to 7,778.19.

The Cboe Volatility Index, or VIX (), an options-based gauge of investor anxiety, rose 1.9 points to 20.47, its highest in about a month.

Activision Blizzard Inc (O:) dropped 2.0% after Bernstein downgraded the videogame maker’s shares to “market perform.”

Ford Motor Co (N:) shares fell 3.1% after the carmaker reported a fall of about 5% in U.S. auto sales for the third quarter. General Motors Co (N:) slumped 4.0% after its quarterly sales came in slightly short of U.S. car shopping website Edmunds’ forecast.

Among bright spots, homebuilder Lennar Corp (N:) rose 2.6% after the company reported a better-than-expected profit as cheaper mortgage rates led to higher demand for its homes.

Johnson & Johnson (N:) gained 1.3% after the drugmaker said it will pay $20 million to settle claims by two Ohio counties, allowing it to avoid an upcoming federal trial seeking to hold the industry responsible for the nation’s opioid epidemic.

Declining issues outnumbered advancing ones on the NYSE by a 3.94-to-1 ratio; on Nasdaq, a 2.85-to-1 ratio favored decliners.

The S&P 500 posted 3 new 52-week highs and 13 new lows; the Nasdaq Composite recorded 4 new highs and 175 new lows.