The Dow slumped 2 percent on Friday, pushing the index into correction territory as investors fretted about weak economic data from China, which could signal headwinds for the global economy.
The Dow shed almost 500 points on Friday, dipping to 24,101 points. With that decline, the index has shed 11 percent of its value from its most recent high, marking its entry into a "correction," which describes a loss of at least 10 percent from a recent high. The tech-heavy Nasdaq lost 2.2 percent on Friday, placing it at a decline of 15 percent from its August peak.
Retail sales and industrial production in China both slowed in November, a trend that President Donald Trump attributed to his trade war with the country. But the softness in China's industrial sector shows that the trade fight with the U.S. is taking a toll on both sides, said Ian Shepherdson of Pantheon Macroeconomics.
"The rollover in China's industrial indicators points to further weakness ahead for U.S. manufacturing, illustrating why both sides need an agreement, and soon," he said in a client note.
Sameer Samana, senior global market strategist for Wells Fargo Investment Institute, said investors aren't just concerned about China's economy. They're wondering if the U.S. economy is likely to run out of steam sooner than they had thought.
"Market consensus has been that the next recession is probably in 2020 or beyond," he said. Now, he said, the market is "really testing that assumption and trying to figure out whether it's sooner."
Technology and internet companies declined on Friday, with Cisco Systems losing 3.5 percent and software maker Adobe dropping 7.3 percent after its fourth-quarter profit fell short of Wall Street estimates.
Progress on trade
Earlier this week, investors were cheered that tensions between Washington and Beijing were cooling. Chinese officials said Friday it isretaliatory tariff hikes U.S. cars, trucks and auto parts. China has also resumed purchases of soybeans from U.S. farmers.
The move is China's first step in response to President Donald Trump's Dec. 1 agreement to suspend U.S. tariff hikes for a similar 90-day period while the two sides negotiate over American complaints about Beijing's technology policy and trade surplus.
"This suggests that the Chinese are serious about reaching a deal and that trade talks haven't been derailed by the Huawei incident," Julian Evans-Pritchard, senior China economist with Capital Economics, said in a report.
The arrest earlier this month of the, a Chinese telecommunications company, at the behest of U.S. authorities had raised concerns about the trade talks.
China expects its economy to grow 6.5 percent this year. While that is strong by global standards, it represents a decline from the country's double-digit percentage growth several years.