Strong Wall Street start ends in big drop

S&P 500 index falls just short of correction territory

Wall Street took investors on a wild ride Monday, with the Dow swinging more than 900 points before closing down for the day. The Standard & Poor’s 500 also shifted violently but avoided ending in official “correction” territory.

The latest sell-off was prompted by renewed tariff worries.

The Dow Jones industrial average rose more than 350 points in morning trading before going into a free-fall that dragged it down 566 points from Friday’s close. When trading ended, the blue-chip average was down 245 points, or 1 percent, at 24,443. The broad S&P 500, which was up as much as 2 percent and fell nearly 4 percent from its high point for the day, closed down 0.7 percent at 2641.25 – or 9.9 percent off its Sept. 20 high. That left the index just shy of the 10 percent drop needed for a correction.

Stocks, which have been under pressure for weeks since the S&P 500 hit its high, continue to struggle under the weight of trade-war fears and concerns that the U.S. central bank will hike interest rates too aggressively and cause damage to the economy.

The broad stock market gauge turned sharply lower in the afternoon after Bloomberg reported that the U.S. is preparing to announce more tariffs on China in early December if talks between President Donald Trump and China President Xi Jinping are not able to ease the trade war in talks.

That news triggered a fresh round of selling by investors who are increasingly concerned that a protracted trade fight with China, the world’s second-biggest economy, will cause the U.S. economy and foreign economies to slow.

Many leading stocks fell, including Amazon.com, which dropped more than

6 percent, and video streaming service Netflix, which slipped more than 5 percent, and airplane maker Boeing, which cratered more than 6.5 percent after one of its Boeing 737 planes was involved in a deadly crash in Indonesia.

With the S&P 500 now in danger of suffering its second corrective phase this year following a 10.2 percent drop that ended in early February, Wall Street is debating whether the 9-year-old bull market is in danger of falling more and vulnerable to its first bear market, or a

20 percent-plus drop.

“It doesn’t take heavy analysis to recognize this market is now approaching bear territory,” Michael Wilson, equity strategist at Wall Street firm Morgan Stanley, told clients in a report.

While the broad S&P 500 is down only about 10 percent from its high, more than 40 percent of U.S. stocks, he says, have fallen more than 20 percent from their highs in the past year.

The main worry is that the economic challenges that are building could cause investors to re-evaluate their high expectations for corporate profits in the quarters ahead. While earnings for companies in the July-September quarter are seen growing at a 20 percent clip for the third consecutive quarter, Wall Street pros are worried that earnings will slow next year from the 10 percent growth now expected by analysts. What could cause the drag? Higher wages and rising commodities costs due to tariffs.