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Stocks tumble as investors fret about China’s growth

The Dow Jones industrial average fell 137.51 points, or 0.5%, to 25,162.41 on Wednesday.
The Dow Jones industrial average fell 137.51 points, or 0.5%, to 25,162.41 on Wednesday.
(Richard Drew / Associated Press)

Deepening worries about global economic growth, particularly in China, set off a rout in riskier assets including technology stocks, copper and crude oil Wednesday. U.S. retailers took a drubbing after Macy’s reported weaker sales.

An unexpected drop in profits for Chinese tech giant Tencent surprised investors and added to some recent concerns about the health of China’s economy. Tencent, a gaming and messaging company, is the most valuable tech firm in China. This week, reports on growth in factory output, consumer spending and retail sales in China were all disappointing.

Large firms fell, including China’s Alibaba and Baidu and the United States’ Facebook and Microsoft.

Oil prices sank, and copper plunged to its lowest price in a year as investors worried about the health of the global economy. The Standard & Poor’s 500 index had its biggest decline since late June, while traditionally safer investments such as bonds and high-dividend stocks rose.

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“This year we’ve seen slower growth. Everyone expected that,” said Kate Warne, an investment strategist at Edward Jones. “Over the last couple of months it looks like growth has been slower than everyone expected.”

The S&P 500 slid 21.59 points, or 0.8%, to 2,818.37. Earlier in the day it was down as much as 1.3%.

The Dow Jones industrial average fell 137.51 points, or 0.5%, to 25,162.41. The Nasdaq composite dropped 96.78 points, or 1.2%, to 7,774.12. The Russell 2000 index of smaller-company stocks sank 21.91 points, or 1.3%, to 1,670.67.

Jefferies & Co. analyst Karen Chan said Tencent’s revenue was also disappointing, mostly because of weak results from its mobile gaming business.

Tencent’s stock slid 3.6% in Hong Kong. The U.S.-listed shares of online retailer JD.com declined 4.5% to $32.36, and web search company Baidu fell 1.3% to $213.47.

U.S. benchmark crude slid 3% to $65.01 a barrel in New York. Brent crude, the standard for international oil prices, fell 2.3% to $70.76 a barrel in London.

Copper tumbled 4.5% to $2.56 a pound, its lowest price in more than a year. The metal is considered an important economic indicator because of its uses in construction and power generation. Copper futures have fallen more than 20% since they hit an annual high of $3.30 a pound in early June.

Macy’s plunged 15.9% to $35.15 after reporting that its sales slowed in the second quarter. Kohl’s shed 5.8% to $74.39. Retailers have struggled for years as investors worried about the growing threat of Amazon.com and other online shopping options. Wednesday’s losses interrupted a huge rebound for the stocks in 2018.

Bond prices rose. The yield on the 10-year Treasury note fell to 2.86% from 2.89%.

Banks fell because of a sharp drop in interest rates, a drop that makes mortgage and other loans less profitable. High-dividend companies such as utilities and phone companies did better than the rest of the market. Investors often treat those stocks as an alternative to bonds, buying them when yields fall.

Turkey’s currency stabilized and rose after authorities sought to ease liquidity problems in the banking system. But Turkey imposed $500 million in tariffs on U.S. goods as tensions between the countries increased. There is also no sign that Turkey’s president will let the central bank raise interest rates, which economists say it should do urgently to support the currency.

The Turkish ISE National 100 index slumped 3.4% after Tuesday’s 0.8% rise. Indexes in other emerging markets, including Brazil and Russia, skidded as well.

Wine and beer maker Constellation Brands is ramping up its investment in cannabis company Canopy Growth by buying about $4 billion in stock. Canopy shares soared 30.4% to $32.11 while Constellation Brands skidded 6.1% to $208.27.

Tesla slipped again, falling 2.6% to $338.69, after Fox Business reported that the Securities and Exchange Commission subpoenaed documents from the electric car company as a previously reported inquiry into the company intensifies.

Chief Executive Elon Musk tweeted last week that he was considering taking Tesla private and had secured funding to do so. At least three lawsuits have been also filed over that tweet. The stock soared after Musk’s message but has since surrendered that gain.

Gold fell 1.3% to $1,185 an ounce. Silver fell 4% to $14.45 an ounce.

Wholesale gasoline fell 1.8% to $2 a gallon. Heating oil fell 1.8% to $2.09 a gallon. Natural gas slipped 0.6% to $2.94 per 1,000 cubic feet.

The dollar fell to 110.57 yen from 111.22 yen. The euro rose to $1.1346 from $1.1339.


UPDATES:

3:05 p.m.: This article was updated with closing prices, context and analyst comment.

This article was originally published at 7:30 a.m.


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