Stocks slid Tuesday as investors pulled back amid signs that corporate profits are cresting and potential threats to global economic growth are more serious than previously thought. After sinking more than 500 points, or nearly 2 percent, in early trading, the Dow ended the trading day 126 points lower, or 0.5 percent.
The S&P 500 closed down 0.6 percent and the Nasdaq gave up 0.4 percent.
By noon, stocks had recovered slightly from the morning massacre, with the blue-chip Dow Jones industrial average off roughly 400 points and Caterpillar down nearly 10 percent after the company said President Donald Trump’s taxes on imported steel were driving up costs. Caterpillar ended the day 7.7 percent lower, at $118.98.
Markets in Asia and Europe also fell. Traders are weighing the risks of Italy’s enormous debt problems, with the euro sinking ahead of a European Commission meeting to assess the country’s budget plans.
Also in focus is the ongoing controversy over the killing of Saudi journalist Jamal Kashoggi, with investors assessing the potential impact on relations between the U.S. and Saudi Arabia and global oil prices.
Some Wall Street analysts think crude oil prices are unlikely to surge despite the pressure on the U.S. to punish Saudi Arabia, a major oil exporter, over Khashoggi’s alleged murder.
“Given the mutual dependence of the two nations, we do not expect a serious escalation that would disrupt oil supplies,” Mark Haefele, chief investment officer with UBS Global Wealth Management, said in a note. “But even if the dispute blows over, we see reasons for oil prices to remain firm.”
More broadly, financial markets around the globe and in the U.S. are reacting to a move by major central banks to raise interest rates and to concerns about what many fear could be a prolonged trade fight between the U.S. and China.
Investors are starting to fret about slowing growth in the U.S. and China, the world’s two largest economies, according to Capital Economics. Although the Commerce Department is expected on Friday to report that U.S. gross domestic product grew at a healthy clip between July and October, economists now forecast that quarterly growth will slip below 3 percent in the fourth quarter and into 2019.
One key factor weighing on domestic growth: rising borrowing costs. The Federal Reserve in September raised short-term interest rates for the third time this year, with most forecasters predicting a fourth hike in December. It was the eighth hike since the central bank started lifting its benchmark lending rate in late 2015.
Technology and bank stocks led the decline Tuesday, with industrial, transportation and utilities also losing ground.