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Wall Street drops two percent, spooked by growth and trade worries


By Lewis Krauskopf

(Reuters) - tumbled more than 2 percent on Tuesday, led lower by and industrial shares, as the U.S. market sent worrisome signs about economic growth and investors worried anew about global trade.

A prominent Federal Reserve official's comments about the path of interest rate hikes added to the uncertainty for investors, as did setbacks for Britain's plans to leave the

The 500 <.SPX> was on pace for its biggest single-day percentage drop in about six weeks, giving back some gains from Monday and a week earlier, when the benchmark index tallied its largest weekly percentage gain in nearly seven years.

Investors were focused on yields, where the benchmark 10-year yield fell to its lowest point since mid-September. The spread between the 10-year yield over its two-year counterpart also shrank to the smallest in over a decade, a closely watched signal because a so-called "inversion," when the two-year yield more than the 10-year bond, preceded all the recessions of the past 50 years.

"We've had a huge move in the yield curve," said at Keefe, in "Investors are worried about growth right now. Today is the perfect storm."

The <.DJI> fell 590.02 points, or 2.28 percent, to 25,236.41, the 500 <.SPX> lost 62.05 points, or 2.22 percent, to 2,728.32 and the <.IXIC> dropped 195.46 points, or 2.63 percent, to 7,246.06.

Stocks had rallied on Monday following a truce between U.S. and Chinese on their trade dispute following weekend talks in Argentina, but investor optimism over a resolution faded on Tuesday. Trump himself warned he would revert to tariffs if the two sides could not resolve their differences.

"The sell-off that we have seen throughout the day is really about taking a look at the tariff conversation and realizing that nothing has been resolved and that there is still some work to do and some of the euphoria that we felt yesterday was more on the headline than on the substance," said Delores Rubin, senior at Deutsche Wealth Management in

Financial shares <.SPSY>, which are particularly sensitive to market swings, dropped 3.6 percent and were the worst performing 500 sector.

The trade-sensitive industrial sector <.SPLRCI> fell 3.4 percent, with and , seen as bellwethers for the trade issue, declining 3.8 percent and 5.4 percent, respectively.

shares dropped 3.6 percent on bearish comments from brokerage and as supplier cut its outlook.

Utilities <.SPLRCU>, typically viewed as a group, was the only one of the 11 S&P 500 sectors in positive territory.

In comments on Tuesday, Fed said should expect to continue raising interest rates "over the next year or so" even while it pays close attention to possible risks highlighted by financial markets.

The comments came after those from Fed last week, which lifted stocks as they were interpreted as suggesting a less aggressive path of rate hikes.

"Maybe we're not going to get as dovish a Fed as some think," said Joseph LaVorgna, Chief Economist, at in New York.

Declining issues outnumbered advancing ones on the NYSE by a 4.03-to-1 ratio; on Nasdaq, a 5.10-to-1 ratio favoured decliners.

The S&P 500 posted 40 new 52-week highs and 27 new lows; the recorded 36 new highs and 164 new lows.

(Additional reporting by and in New York, Shreyashi Sanyal in Bengaluru; Editing by and Nick Zieminski)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Wed, December 05 2018. 02:26 IST