The Dow Jones Industrial Average fell over 200 points to begin Thursday morning’s market session as slowing global growth continues to stoke investor fear.
The European Commission pared down its 2019 growth outlook for the euro zone, saying global trade tensions and other issues will drag on its largest economies. The Commission said growth will slow to 1.3 percent compared to 1.9 percent for 2018, but is forecasting a subsequent rebound in 2020 to 1.6 percent.
The lowered outlook fanned the proverbial flame of global economic growth slowing. The S&P 500 dipped 1 percent lower while the Nasdaq Composite dropped 1.10 percent.
Companies who have reported fourth quarter earnings thus far are showing a profit increase of 14.1 percent on a year-over-year basis, according to data from Factset. However, some companies have also tempered their profitability guidance for future quarters.
“The market is pricing in a down Q1 but they’re pricing in a positive Q2 and Q3,” said Andrew Slimmon, managing director at Morgan Stanley Investment Management. “The risk is that Q2 slips to zero and now you’re talking about two consecutive quarter of negative earnings growth, which is technically an earnings recession.”
“The reason why the market has not focused on this yet is there was such an overwhelmingly high level of bearishness at the beginning of the year,” Slimmon added.
Related: Why Investors Should Revisit China ETFs
Furthermore, the Bank of England also cut down its outlook, citing slower growth for 2019–its slowest pace in a decade.
U.S. equities have been buoyed by better-than-expected earnings reports, but some analysts feel that the upside thus far in 2019 could be only temporary. Investors could expect sideways, rangebound market movement for the rest of 2019.
“The S&P 500 recovery has extended to key resistance from its 200-day average and late 2018 highs at 2742/2815. We look to fade the recovery here, and for this to define the top of a potentially lengthy sideways range,” said David Sneddon, managing director at Credit Suisse, in a note.
For more market trends, visit ETF Trends.