/Dow Slides Red as China’s Factories Struggle Amid Economic Woes

Dow Slides Red as China’s Factories Struggle Amid Economic Woes

By CCN.com: The Dow and broader U.S. stock market traded lower on Tuesday, as investors sifted through weaker than expected Chinese manufacturing data that seemed to show a loss of momentum at the start of the second quarter for the world’s second-largest economy.

Dow Flat; S&P 500, Nasdaq Hold Near Record Levels

The Dow Jones Industrial Average opened 40 points higher on Tuesday but has since reversed gains to post a minor loss. At the time of writing, the blue-chip index was down 31 points, or 0.1%, at 26,523.11.

Dow Jones Industrial Average slides in early morning trade. | Chart via Yahoo Finance.

The broad S&P 500 Index of large-cap stocks declined 0.3% to 2,935.17. Losses were primarily concentrated in the communication services sector, which fell 2.4%.

Meanwhile, the technology-focused Nasdaq Composite Index plunged 0.5% to 8,112.36.

The S&P 500 and Nasdaq set fresh record highs on Monday as upbeat consumer spending data lifted investor sentiment.

A measure of implied volatility known as the CBOE VIX rose at the start of Tuesday’ session, reaching a high of 13.41 on a scale of 1-100 where 20-25 represents the historic average. VIX remains largely in a holding pattern, which is taken as a sign of complacency or optimism in the stock market recovery.

Trouble in China?

China’s economy shows signs of slowing at the start of the second quarter. | Source: Shutterstock.

China’s economy defied expectations in the first quarter, as industrial production rose sharply and consumer demand showed signs of recovery. That momentum appears to have slowed considerably in April, according to the latest batch of PMI data.

China’s official manufacturing purchasing managers index weakened to 50.1 in April from 50.5 in March, the National Bureau of Statistics reported Tuesday. Analysts in a median forecast had called for no change. The non-manufacturing PMI, a gauge of service-sector activity, weakened to 54.3 from 54.8 the previous month.

On the PMI scale, 50 separates expansion from contraction.

A slowing China is one of the biggest risk factors facing the world economy. The International Monetary Fund, World Bank and Organization of Economic Cooperation and Development have each cited Chinese headwinds in their downward revisions to global growth. A prolonged trade war with the United States has accelerated the slowdown, based on trade, production and foreign direct investment data.

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