Wall Street’s three major indexes tumbled and the Dow confirmed a correction as weak data from China and Europe stoked fears of a global economic slowdown.
Johnson & Johnson shares were the biggest drag after Reuters reported the company knew for decades that its Baby Powder contained asbestos.
The S&P 600 small cap index confirmed it was in a bear market after closing 20 per cent below its August 31 peak, falling 1.6 per cent on the day.
The Johnson & Johnson report, which the company has disputed, sent its shares tumbling 10 per cent in heavy volume, making it the biggest weight from a single stock on the S&P 500 and the Dow Industrials.
Investors focused on global growth concerns and worried about US growth after China reported weak monthly retail sales growth and industrial output numbers, as disappointing economic data was released from the euro zone.
‘Weakness showing through in the Chinese economy in terms of the numbers that were reported as a result of the ongoing trade war was certainly a concern that bleeds into global growth concerns,’ said Ryan Larson, head of US equity trading at RBC Global Asset Management in Chicago.
Larson also pointed to concerns about a Reuters poll of economists which found the risk of a US recession in the next two years rose to 40 per cent and found a significant shift in expectations toward fewer 2019 Federal Reserve interest rate rises.
The Dow Jones Industrial Average fell 496.87 points, or 2.02 per cent, to 24,100.51, 10 per cent below its October 3 closing high.
The S&P 500 lost 50.59 points, or 1.91 per cent, to 2,599.95, 11.3 per cent lower than its September 20 record close, marking the poorest performance for the benchmark since it fell more than 14 per cent between May 2015 and January 2016.
And with Friday’s close the losses inflicted by the correction are deeper than the declines suffered earlier this year.
The Nasdaq Composite dropped 159.67 points, or 2.26 per cent, to 6,910.67.
Johnson & Johnson helped pull down the S&P healthcare index 3.4 per cent, making it the biggest percentage decliner among the S&P’s 11 major sectors.
The technology index , which includes a number of companies with global operations, especially China, dropped 2.5 per cent.
The energy index fell 2.4 per cent.
Strong US retail sales data appeared to have little impact on markets, with the S&P retail sector falling 2.4 per cent.
‘Solid fundamental data that gets to the core of the US economy is overshadowed by the potential for a global slowdown washing up on our shores,’ said Phil Blancato, chief executive of Ladenburg Thalmann Asset Management in New York but he said the sell off was a buying opportunity.
The market struggled all week with choppy trading, on concerns ranging from US-China trade talks, interest rates and a flattening US Treasury yield curve and the shape of Brexit.
For the week, the S&P fell 1.25 per cent and the Dow lost 1.2 per cent while the Nasdaq shed 0.84 per cent.
Investors appeared to shrug off Beijing’s announcement it would suspend additional tariffs on US-made vehicles and auto parts for three months starting January 1.
Amazon.com was the S&P’s second biggest drag with a 4 per cent drop. Another highflyer, Apple, fell 3.2 per cent, with reports citing a top analyst slashing iPhone sales estimates for the decline.
Costco Wholesale Corp dropped 8.5 per cent after reporting a fall in quarterly gross margin and was the biggest laggard in consumer staples.