US stocks have sunk after a weak report on Chinese manufacturing activity and the latest batch of lacklustre corporate earnings.
The Dow Jones Industrial Average slumped 175.99 (1.07 per cent) to 16,197.35.
The broad-based S&P 500 fell 16.40 (0.89 per cent) to 1,828.46, while the tech-rich Nasdaq Composite Index fell 24.13 (0.57 per cent) to 4,218.87.
HSBC’s China manufacturing sector purchasing managers index fell to 49.6, below the 50 line between growth and contraction, raising concerns about the prospects for the world’s second-largest economy.
The China data came amid a mixed batch of corporate earnings reports with strong earnings from Netflix offset by disappointing results from Lockheed Martin and others.
Michael James, managing director of equity trading at Wedbush Securities, said the new China manufacturing data, while “concerning,” is “just one data point.”
Mace Blicksilver, director of Marblehead Asset Management, said Thursday’s trade could the start of a stronger retreat if the China data implies deeper economic problems.
“Only time will tell,” Blicksilver said.
The fall in stocks was accompanied by a jump in US Treasury prices that Blicksilver called “part and parcel of the same trade.”
“You have weak stocks and weak growth, potentially a real problem in China and you’re going to get a flight to the bond market,” he said.
Hard-hit companies included banks like JPMorgan Chase (-1.9 per cent) and Citigroup (-2.3 per cent), as well as metals producer Freeport-McMoRan Copper & Gold (-2.4 per cent) and Dow Chemical (-2.1).
Banks and materials stocks typically advance in an improving economy and fall when the broader economy weakens.
Netflix shot up 16.5 per cent after quarterly earnings rose to $US48 million ($A54.38 million) compared with $8 million a year ago. The online video-streaming company also reported a big jump in subscribers.
Online marketplace eBay rose 1.0 per cent after announcing that activist investor Carl Icahn had taken a stake in the company and was advocating a spin-off of its PayPal payments unit. EBay said it will fight Icahn’s proposal.
Defence contractor Lockheed Martin fell 3.9 per cent after earnings of $1.50 per share widely missed expectations of $1.95 per share.
Bond prices rose. The yield on the 10-year bond fell to 2.77 per cent from 2.86 per cent Wednesday, while the yield on the 30-year declined to 3.68 per cent from 3.76 per cent. Bond prices and yields move inversely
