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Markets Slump on Growth and Housing Data

After a four-day winning streak, in which the Dow Jones Industrial Average gained close to 800 points, stocks saw a slump in trading on Tuesday. The Dow fell by around 302 points, largely on global economic news and China’s slowing growth. Adding to the selloff was an early report that the U.S. canceled plans for preliminary trade negotiations with China, and disappointing data from the National Association of Realtors.

In addition to the Dow slump, the S&P 500 lost 1.4 percent, or 37.81 points, and the Nasdaq Composite fell by 1.9 percent, or 139.87 points.

Tuesday morning, the Financial Times reported that the White House had withdrawn an invitation to two Chinese officials. The officials were reportedly planning to visit in preparation for trade negotiations between China’s vice-premier and US Trade Representative Robert Lighthizer next week.

Later in the day, the report was disputed by White House economic advisor Larry Kudlow, and markets experienced a small recovery.

“There was never a planned meeting,” said Kudlow on CNBC. “We are in constant communication with the Chinese officials. I don’t know where people got this idea.”

Existing Home Sales Disappoint

Adding on to the bearish trading day, the National Association of Realtors reported that sales of existing homes dropped by 6.4 percent in December, making it the weakest performance for home sales since November 2015.

“Looking ahead to 2019, expect weaker existing-homes sales as the new year ushered in a government shutdown and worsening economic uncertainty,” says Cheryl Young, who is a senior economist at Trulia.

IMF Releases Trimmed Outlook

The International Monetary Fund unveiled its updated forecasts at the World Economic Forum in Davos Switzerland. While its United States growth forecast remained unchanged at 2.5 percent, it trimmed forecasts for global growth, citing “Softening Momentum, High Uncertainty.” After already trimming growth expectations in October 2018, the IMF decreased them further to 3.5 percent in 2019 and 3.6 percent in 2020.

“The global growth forecast for 2019 and 2020 had already been revised downward in the last WEO, partly because of the negative effects of tariff increases enacted in the United States and China earlier that year,” reads the statement from the IMF. “The further downward revision since October in part reflects carry over from softer momentum in the second half of 2018”

While trade tensions play a large role in the IMF’s projections, they also cite fuel emission standards in Germany and Italy, as well as natural disasters in Japan as reasons for the slowing growth.

The IMF sees further trade war escalation and Brexit uncertainty as serious risk factors in global economic growth going forward in 2019.

“An escalation of trade tensions beyond those already incorporated in the forecast remains a key source of risk to the outlook…A range of triggers beyond escalating trade tensions could spark a further deterioration in risk sentiment with adverse growth implications, especially given the high levels of public and private debt,” wrote the IMF. “These potential triggers include a “no-deal” withdrawal of the United Kingdom from the European Union and a greater-than-envisaged slowdown in China.”