The Dow Jones Industrial Average fell over 300 points in the early trading session as fears of a global economic slowdown permeated the markets after the European Central Bank (ECB) lowered its growth forecast for 2019.
The drop in the Dow was paired with the S&P 500 losing as much as 1 percent and the Nasdaq Composite declining as much a s 1.1 percent. The Dow is trying to avoid its fourth losing session in a row.
“They’re basically admitting the economy is quite soft,” said Peter Cardillo, chief market economist at Spartan Capital Securities. This adds to one thing: uncertainty.”
ECB President Mario Draghi said its growth estimate was pared down to 1.1 percent after an initial forecast of 1.7 percent released in December.
“The persistence of uncertainties related to geopolitical factors, the threat of protectionism and vulnerabilities in emerging markets appears to be leaving marks on economic sentiment,” Draghi told reporters.
Trade Deficit Widens
On Wednesday, the Commerce Department reported that the trade deficit increased 12.5 percent in 2018, resulting in a 10-year high.
To end 2018, the trade deficit went 18.8 percent higher during the month of December, resulting in the final $621 billion gap. That figure represents the largest gap since 2008 and follows the $552.3 billion deficit in 2017.
The rise in the deficit comes as U.S. President Donald Trump is looking to conclude trade negotiations with China. Trade talks have already moved past the initial March 1 deadline with the notion that the capital markets have already priced in a deal, resulting in sell-offs this week.
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Earlier this year, the International Monetary Fund lowered its global growth forecast, pointing to ongoing trade wars dampening China’s economic outlook as well as rising interest rates in the United States.
“Higher trade uncertainty will further dampen investment and disrupt global supply chains,” said IMF chief economist Gita Gopinath.
The IMF trimmed its growth expectations to 3.5 percent from 3.7 percent. Global growth outlook for 2020 was also cut to 3.6 percent from 3.7 percent.
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