Reports that the Trump administration turned down China’s offer for preparatory trade talks dragged stocks even lower.
The Dow, which had already been down 300 points, fell another 100 points on the report.
US stocks bounced off their lows after White House economic adviser Larry Kudlow denied the report.
“The story is not true…There was never a planned meeting,” Kudlow told CNBC. “We are in constant communication with the Chinese officials. I don’t know where people got this idea.”
Closed on Monday for Martin Luther King Jr. Day, markets got their first chance Tuesday to react to China’s 2018 GDP report and the IMF’s global economic outlook presented at the World Economic Forum in Davos, Switzerland. Both reports were released Monday.
But the report made clear that a no-deal Brexit and the unresolved trade war between the United States and China remain the biggest known risks to growth.
Also Monday, China reported that its economy grew 6.6% in 2018. That’s the weakest annual performance since 1990.
Chinese growth has lost momentum following government efforts to try to rein in high levels of debt. It has also started feeling the effects of the trade war with the United States, which has resulted in new tariffs on more than $250 billion of Chinese exports.
And Tuesday, the National Association of Realtors reported sales of existing US homes fell by 6.4% last month. That marks the weakest performance since November 2015. Home sales had edged lower throughout most of 2018 — but nothing close to the drama of December’s decline. Existing home sales fell 10.3% for the year.
The Federal Reserve has been closely watching the housing market for signs of deterioration as it weighs its next move. It could continue raising rates to fight inflation or slow its rate-hike campaign to avoid stalling an economic growth period apparently on its last legs.
As earnings season gets underway, investors will look to corporate sales and profit growth for signs of a slowing economy.
Source : CNN