(CNN) — It may be a new year, but the same fears are roiling markets.
The Dow fell as much as 399 points Wednesday. But the market recovered from those early losses. In recent trading, the Dow was only down slightly, the S&P 500 was flat and the Nasdaq turned green.
It marks another wobbly trading day as investors continue to debate the seriousness of the economic slowdown at home and overseas.
Tech stocks like Microsoft (MSFT), Advanced Micro Devices (AMD) and Apple (AAPL) all started the day under serious pressure before rebounding. China-sensitive stocks such as Boeing (BA) and Caterpillar (CAT) also recovered from early selling. But Tesla (TSLA) is still down sharply after cutting vehicle prices by $2,000.
The selling started overseas, with Asian and European markets careening lower following the release of another weak economic report out of China. New data revealed that China’s manufacturing sector contracted in December, an unsettling development for the world’s second-largest economy. It is this second time this week that data has indicated China’s huge manufacturing sector is shrinking.
“It is looking increasingly likely that the Chinese economy may come under greater downward pressure,” said Zhengsheng Zhong, director of macroeconomic analysis at research firm CEBM Group, in a statement.
Regional manufacturing reports in the United States have also been weak lately. The ugly factory data only reinforces the economic slowdown fears at the heart of the Wall Street meltdown.
Hong Kong’s Hang Seng closed 2.8% lower. The Shanghai Composite fell 1.2% and Australia’s ASX dropped 1.6%. Japan’s markets were closed for a public holiday.
Global growth fears initially sent US oil prices plunging again. But crude later reversed course and was recently trading 5% higher to $47.70 a barrel. Copper, which is very sensitive to economic fears, declined 1%.
Despite a wild rebound during the last few days of the year, 2018 was the worst year for US stocks since the 2008 financial crisis. The S&P 500 nearly plunged into a bear market last week.
The CNN Business Fear & Greed Index, a gauge of market sentiment, is flashing “extreme fear.”
The US stock market had a handful of bad first trading days in recent years. The S&P 500 tumbled 1.5% to start 2016 on fears about China and crashing oil prices (sound familiar?). However, the index ended up recovering that year, closing nearly 10% higher on the year.
On the other hand, the S&P 500’s 1.4% decline to start 2008 signaled real trouble ahead. The index ended up losing 38% that year as investors feared an outright collapse of the financial system.
The worst start to a year occurred during the Great Depression when the S&P 500 plummeted 7% on the first day of trading in 1932, according to Bespoke Investment Group.
Wall Street is now watching closely to see whether economic concerns translate into lower earnings — the real driver of stock prices. Companies including FedEx (FDX) have already warned of trouble due to the softness from China. Last month, analysts cut their 2019 earnings forecasts on half of the companies in the S&P 500, according to FactSet.
“Earnings will undoubtedly slow in 2019 but to what extent?” Peter Boockvar, chief investment officer at Bleakley Advisory Group, wrote to clients.
The-CNN-Wire
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