US stocks drop on downbeat earnings, trade tensions

Wall Street fell in a day of heavy trading on Wednesday with the S&P 500 posting its biggest percentage drop since late June as investors turned risk-averse on disappointing earnings and escalating global tariff worries.

Chinese technology company Tencent reported its first profit decline in almost 13 years, putting pressure on the US tech sector. Technology stocks were the biggest drag on the S&P 500 and the Nasdaq, with the S&P 500 technology index down 1.1%.

Retail shares fell as Macy’s stock tumbled 15.9%after margin fears spooked investors, overshadowing its stronger-than-expected sales and earnings.

“There was a lot of optimism heading into retail earnings,” said JJ Kinahan, chief market strategist at TD Ameritrade in Chicago. Macy’s results have “taken an edge off that optimism.” Second-quarter US earnings have mostly been stronger than expected, with 79.1%beating analyst expectations, according to Thomson Reuters I/B/E/S. Results are in for 460 of S&P 500 companies.

The trade fracas heated up as Turkish President Tayyip Erdogan doubled tariffs on some US imports, and China lodged a complaint with the World Trade Organization against American trade policies.

The tariff-sensitive industrial sector slipped 0.5%, with Caterpillar and Boeing weighing on the Dow.

“A combination of fears of contagion from Turkey and a possibility of a China slowdown has upset markets worldwide,” Kinahan added.

The S&P 500 energy index dropped 3.5%as a fall in crude prices was exacerbated by an unexpected surge in US stockpiles. The energy index suffered its biggest percentage loss since February 5.

Metals prices fell, dragging down the materials sector , which ended down 1.6%. The S&P 1500 metals and mining index was down 4.8%.

Adding to the day’s bearish tone for metals and for stocks was the US dollar. The dollar index briefly touched a 13-month high before ending the day essentially flat.

The Dow Jones Industrial Average fell 137.51 points, or 0.54%, to 25 162.41, the S&P 500 lost 21.59 points, or 0.76%, to 2 818.37 and the Nasdaq Composite dropped 96.78 points, or 1.23%, to 7 774.12.

Losses were somewhat offset by gains in defensive sectors, including real estate and utilities.

Tesla Inc stock fell 2.6% as the Securities and Exchange Commission sent the company subpoenas regarding chief executive Elon Musk’s plan to go private, according to Fox Business Network.

Among gainers, Canada-based Canopy Growth soared by 30.4% following Corona beer maker Constellation Brands’ announcement that it was upping its stake in the cannabis producer.

Chipotle Mexican Grill stock rose by 6.6% after Morgan Stanley upgraded the burrito chain to “overweight” from “equal weight.”

In economic news, retail sales rose more than expected in July, while farm productivity rose at its fastest rate in over three years.

Declining issues outnumbered advancing ones on the NYSE by a 2.25-to-1 ratio; on Nasdaq, a 3.10-to-1 ratio favoured decliners.

The S&P 500 posted 13 new 52-week highs and 12 new lows; the Nasdaq Composite recorded 63 new highs and 149 new lows.

Volume on US exchanges was 7.86 billion shares, compared with the 6.53 billion average over the last 20 trading days.