China worries weigh on Wall Street, earnings expectations fall

NEW YORK (Reuters) – U.S. stocks declined on Monday as an unexpected drop in China’s exports reignited worries of a global economic slowdown and prompted caution among investors as the corporate earnings season kicked off.

FILE PHOTO: Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., January 10, 2019. REUTERS/Brendan McDermid

Data showed that China’s exports unexpectedly fell the most in two years in December and imports also contracted. The drop pointed to further weakening of the world’s second-largest economy and faltering global demand.

Chipmakers, which get a sizable portion of their revenue from China, took a hit, with the Philadelphia SE Semiconductor Index .SOX down 1.6 percent. The technology sector’s .SPLRCT 0.9 percent fall was the biggest drag on the S&P 500.

The Dow Jones Industrial Average .DJI fell 86.11 points, or 0.36 percent, to 23,909.84, the S&P 500 .SPX lost 13.65 points, or 0.53 percent, to 2,582.61 and the Nasdaq Composite .IXIC dropped 65.56 points, or 0.94 percent, to 6,905.92.

As worries over global growth have mounted, lofty expectations for U.S. corporate growth have subsided. Analysts now estimate that S&P 500 earnings will grow 14.3 percent year-over-year for the fourth quarter, whereas in October they forecast a 20.1-percent jump, according to IBES data from Refinitiv.

“It will be a big thing to see if the Chinese slowdown is real, or if it is an excuse for some companies not to hit the high growth seen last quarter,” said Craig Birk, chief investment officer at Personal Capital in San Francisco. “If things are really slowing down, you’ll start to see it show up this quarter in earnings.”

Apple Inc (AAPL.O) had pointed to slowing demand in China when it cut its revenue forecast on Jan. 2.

However, earnings season began on a positive

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