NEW YORK (Reuters) – U.S. stocks declined on Monday as an unexpected drop in China’s exports reignited worries of a global economic slowdown and prompted caution among investors as the corporate earnings season kicks off.

Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., January 8, 2019. REUTERS/Brendan McDermid

Data showed that China’s exports unexpectedly fell the most in two years in December and imports also contracted. The drop pointed to further weakening of the world’s second-largest economy and faltering global demand.

Chipmakers, which get a sizable portion of their revenue from China, took a hit, with the Philadelphia SE Semiconductor Index .SOX down 1.3 percent. The technology sector’s .SPLRCT 0.8 percent fall was the biggest drag on the S&P 500.

As worries over global growth have mounted, lofty expectations for U.S. corporate growth have subsided. Analysts now estimate that S&P 500 earnings will grow 14.3 percent year-over-year for the fourth quarter, whereas in October they forecast a 20.1-percent jump, according to IBES data from Refinitiv.

“People are less inclined to take large positions going into the start of earnings season,” said Robert Phipps, director at Per Stirling Capital Management in Austin, Texas. “There’s not a whole lot of reason to be buying now.”

Even so, earnings season began on a positive note as Citigroup Inc (C.N) beat profit estimates. The bank’s shares rose 4.4 percent and bolstered the S&P financial sector .SPSY, which rose 0.9 percent.

JPMorgan Chase & Co (JPM.N) and Wells Fargo & Co (WFC.N) are set to report earnings on Tuesday.

Adding to the downbeat mood on Monday was a partial government shutdown, which entered its 24th day, making it the longest shuttering of federal agencies in U.S. history.

Despite Monday’s drop, the S&P 500 has climbed more than 10 percent from its Christmas Eve low as optimism over U.S.-China trade talks and expectations that the Fed will slow its pace of interest-rate hikes have driven a recent stock rally.

The Dow Jones Industrial Average .DJI fell 48.38 points, or 0.2 percent, to 23,947.57, the S&P 500 .SPX lost 9.2 points, or 0.35 percent, to 2,587.06 and the Nasdaq Composite .IXIC dropped 45.71 points, or 0.66 percent, to 6,925.77.

Shares of PG&E Corp (PCG.N) plunged 51.3 percent after the U.S. power utility said it was preparing to file for Chapter 11 bankruptcy for all of its businesses.

Declining issues outnumbered advancing ones on the NYSE by a 1.31-to-1 ratio; on Nasdaq, a 1.53-to-1 ratio favored decliners.

The S&P 500 posted no new 52-week highs and one new low; the Nasdaq Composite recorded 17 new highs and 14 new lows.

Reporting by April Joyner; Additional reporting by Medha Singh and Amy Caren Daniel in Bengaluru; Editing by Anil D’Silva and Chizu Nomiyama


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