Wall Street dragged down by healthcare stocks, weak economic data

(Reuters) – U.S. stocks fell on Thursday, pressured by weak economic data and a drop in healthcare shares led by Johnson & Johnson, with investors keeping a close watch on U.S.-China trade talks.

New orders for key U.S.-made capital goods unexpectedly fell in December amid declining demand for machinery and primary metals, pointing to a further slowdown in business spending on equipment that could crimp economic growth.

Another set showed the number of Americans filing applications for unemployment benefits fell last week, but the four-week moving average rose to a more than one-year high, suggesting the labor market was slowing down.

The Philadelphia Fed’s gauge on U.S. Mid-Atlantic business activity also showed a decline in February to its weakest level since May 2016.

“The numbers on Philadelphia Fed Manufacturing and durable goods are volatile indicating that the economy is slowing,” said Robert Pavlik, chief investment strategist and senior portfolio manager at SlateStone Wealth LLC in New York.

“Overall, it is showing that the economy is not as strong as it was in the summer of 2018.”

Stocks have gained so far this week on hopes of a trade resolution, extending a rally since the beginning of the year on an upbeat fourth-quarter earnings season and a dovish Federal Reserve.

The United States and China have started to outline commitments in principle on the stickiest issues in their trade dispute, marking the most significant progress yet toward ending a seven-month trade war, sources told Reuters on Thursday.

“The market’s crept up waiting for an actual agreement (with China), anything short of that is a disappointment,” said Rick Meckler, partner at Cherry Lane Investments in New Vernon, New Jersey.

At 9:59 a.m. ET the Dow Jones Industrial Average was down 77.76 points, or 0.30 percent, at 25,876.68. The S&P 500 was down 10.51 points, or 0.38 percent, at 2,774.19 and the Nasdaq Composite was down 40.95 points, or 0.55 percent, at 7,448.12.

Johnson & Johnson shares fell 1.3 percent and weighed on both the S&P 500 and the Dow Jones Industrial Average.

The drugmaker said it received subpoenas from U.S. regulators related to litigation involving alleged asbestos contamination in its signature Baby Powder product line. The S&P healthcare sector fell 0.65 percent.

Nike Inc shares dropped 1.0 percent, weighing the most on the consumer discretionary sector, which slipped 0.35 percent.

A Nike sneaker worn by emerging basketball star Zion Williamson split in half 33 seconds into a hotly anticipated game between Duke University and North Carolina.

Biogen Inc shares fell 3.2 percent after brokerage Stifel downgraded the stock to “hold” from “buy”. The Nasdaq Biotech index was down 1.17 percent.

Among few gainers, lithium producer Albermarle’s shares jumped 5.8 percent after the company posted a higher-than-expected quarterly profit and gave a bullish 2019 outlook.

Declining issues outnumbered advancers for a 1.90-to-1 ratio on the NYSE and for a 1.49-to-1 ratio on the Nasdaq.

The S&P index recorded 10 new 52-week highs and no new lows, while the Nasdaq recorded 30 new highs and five new lows.

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