The Dow drops 300 points in Wall Street's first trading session of 2019

Stocks kicked off 2019 sharply lower Wednesday after recording their largest annual losses since the financial crisis, as a flurry of concerns ranging from political turmoil to slowing growth expectations continued to weigh on Wall Street.

The Dow Jones Industrial Average fell about 300 points, or more than 1.3%. The S&P 500 slid 1.2%, and the Nasdaq Composite was down 1.4%. On Monday, stocks logged their worst year since 2008 following a dramatic week of trading. Markets were closed Tuesday for New Year’s Day.

“Recent sharp market declines have created one of the most challenging market environments to navigate since the end of the Great Recession,” John Lynch, Chief Investment Strategist for LPL Financial, said in an email. “When these kinds of events happen, the challenge is to make the right call on whether markets are telling us something we don’t know … or whether there’s been a dislocation between market fears and economic realities.”

Oil prices declined about 2% amid concerns about oversupply and expectations for slower demand. West Texas Intermediate was trading around $US44.50 per barrel and Brent just above $US53, both down more than a third from October highs.

Turbulence in Washington hasn’t helped the mood, with the federal government entering its second full week of a partial shutdown. House Democrats retaking control of the chamber plan to pass a proposal to reopen the government Thursday as the 116th Congress convenes.

“The ongoing partial shutdown of the Federal government is likely adding to the overall policy uncertainty, exacerbating the volatility in financial markets,” Deutsche Bank analysts wrote in a recent research note. “At present, there is little indication that the Administration is close to resolving its dispute with Congress over funding priorities.”

High-flying technology shares were among the largest decliners Wednesday, with Apple, Amazon, Netflix, and Google parent-company Alphabet shedding between 1% and 3%.

Trade-sensitive companies Boeing and Caterpillar lost more than 2% each after the New York Times reported the Trump administration will likely maintain a hard line on Beijing as negotiations begin ahead of a March deadline for a temporary truce between the largest economies.

Wall Street’s decline reflected risk-off sentiment around the globe as a string of manufacturing data abroad pointed to slowing growth.

After China’s factory activity fell in December for the first time in more than two years, Hong Kong’s Hang Seng Index (-2.77%) had its worst start to the year since 1995. The Shanghai Composite was also more than 1% lower.

In Europe, the IHS Markit Purchasing Managers’ Index reading for the region slipped to its lowest since early 2016 and moved closer to contraction. The pan-European Stoxx 600 and the FTSE 100 in London each stumbled nearly 1% following the results.

Investors will be focusing on the latest snapshot of the US economy this week, with the jobs report out Friday.

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