Caterpillar's China warning rattles investor confidence. | Source: Shutterstock.

Caterpillar’s China Warning Sends Dow Tumbling 310 Points

The U.S. stock market is in firm retreat Monday morning after Dow blue-chip Caterpillar Inc. (CAT) warned of no sales growth in China.

Dow Jones Pivots Lower

All of Wall Street’s major indexes registered sharp losses through the morning, mirroring a volatile pre-market session for Dow futures. The Dow Jones Industrial Average tumbled as much as 401 points before paring losses later in the morning. At last check, the blue-chip index was off 310 points, or 1.3%, at 24,427.41.

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The broad S&P 500 Index fell 1.1% to 2,635.96. Ten of 11 primary sectors traded in negative territory, led by heavy losses in information technology and communications services. Industrials and energy stocks were also under considerable pressure.

Plunging tech shares dragged the Nasdaq Composite Index lower by 1.3% to 7,072.56.

The CBOE Volatility Index, also known as the VIX, jumped double-digits to 20.30 on a scale of 1-100 where 20 represents the historical average. At the time of writing, VIX was up 12.5% to 19.60.

China Growth Sparks Concern

Stocks came under pressure after Caterpillar Inc. posted its biggest earnings miss in ten years. The industrial equipment manufacturer cited a slowdown in China as the major source of risk facing the company and the primary reason for the lackluster quarter.

Caterpillar earned an adjusted $2.55 per share in the fourth quarter on revenue of $14.34 billion. Both figures missed analysts’ expectations, according to Bespoke Investment Group.

Sales in the Asia/Pacific region dropped 4% year-over-year, highlighting a sharp slowdown in Chinese demand. The world’s second-largest economy expanded just 6.4% annually in the fourth quarter and 6.6% for all of 2018. That was the weakest annual expansion in 28 years.

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Nvidia Corp (NVDA) plunged more than 13% after the chipmaker announced that fiscal Q4 2019 earnings could come in $500 million lower than previously expected. Like Caterpillar, the company cited weaker growth in China and macroeconomic instability as primary factors for the lower guidance. A slowdown in its gaming and data center platforms was also to blame.

As of Jan. 18, the vast majority of S&P 500 companies had reported better than expected earnings and were on track for a blended earnings growth rate of 10.6%, according to FactSet.

Tech earnings will dominate the headlines this week. Apple Inc. (AAPL), Amazon Inc. (AMZN), Microsoft Corp (MSFT), and Facebook (FB) are all scheduled to report Q4 results.

Featured image courtesy of Shutterstock. Chart via TradingView.