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Stocks slip as growth concerns weigh

U.S. stocks fell as concerns over slowing global growth outweighed optimism over a reading on domestic trade pointing to a slimmer deficit at the start of the year.

The S&P 500 (^GSPC) fell 0.46%, or 13.09 points, as of market close. The Dow (^DJI) fell 0.13%, or 32.14 points, while the Nasdaq (^IXIC) slipped 0.63%, or 48.15 points.

Domestic equities tracked declines in many European stocks indices European Central Bank President Mario Draghi delivered a dismal description of the euro area economy. He acknowledged ongoing “weakness in world trade” as negatively impacting the manufacturing sector, and a “weakening growth picture” as weighing on the central bank’s inflation outlook. Earlier this month, the ECB downgraded its 2019 GDP forecast for the eurozone to 1.1%, from 1.7% previously.

However, Draghi on Wednesday stopped short of conflating a present slowdown in the eurozone with the prospect of a major economic downturn.

“We are now seeing a more persistent deterioration of external demand,” Draghi said in prepared remarks during a speech in Germany. “But a ‘soft patch’ does not necessarily foreshadow a serious slump.”

Draghi also said the ECB would be monitoring the effects of the central bank’s current policy of negative interest rates, with the eurozone’s key rate currently set at negative 0.4%. “We need to reflect on possible measures that can preserve the favorable implications of negative rates for the economy, while mitigating side effects,” he said, adding that softer bank profits in the region are not an “inevitable consequence” of low interest rates.

The ECB joins central banks across the globe – including the U.S. Federal Reserve – that have recently deployed more accommodative monetary policy in the face of slowing growth.

Meanwhile, further evidence pointing to a sluggish global economy continues to flow.

European Central Bank President Mario Draghi arrives to a meeting of Eurogroup Finance Ministers at the European Council headquarters in Brussels, Monday, Feb. 11, 2019. (AP Photo/Francisco Seco)

On Wednesday, new data showed profit from China’s industrial firms fell the most in more than 7 years. Chinese industrial firm profits fell 14% year-over-year for the period spanning January and February, according to the National Bureau of Statistics. This was the largest drop since late 2011, according to Reuters data, with lower prices in auto, oil processing, steel and chemical industries driving the decline.

Economic data domestically has fluctuated at the start of the year, with investors whipsawed by mixed data on the labor market, manufacturing sector, retail sales and consumer sentiment. This contributed in part to the Federal Reserve’s decision to end its tightening monetary policy campaign during its most recent meeting.

U.S. Treasury yields were down across the curve on Wednesday, with the yield on the 10-year note down 3.1 basis points to 2.381%. This held below the yield on the 3-month bill, down 3.3 basis points to 2.437%.

Economy

Mortgage applications increased 8.9% for the week ending March 22, the Mortgage Bankers Association (MBA) reported in its weekly seasonally adjusted results. The week prior, mortgage applications rose just 1.6%. Purchases were up 6.4% for the week ending March 22, versus 0.3% previously, while refinances increased 12.4%, after rising 3.5% for the week prior.

An “unexpectedly large drop in mortgage rates following last week’s FOMC meeting” helped drive the jump in purchase and refinance applications, said Joel Kan, MBA’s associate vice president of economic and industry forecasting.

The U.S. trade deficit for goods and services narrowed in January to $51.1 billion, the Bureau of Economic Analysis announced Wednesday. The gap was slimmer than the expected $57 billion deficit for the month, according to Bloomberg data. December’s trade deficit was upwardly revised by $100 million to $59.9 billion.

Exports of goods increased by $1.8 billion to $137.4 billion for the month of January, led in part by a $0.9 billion increase in soybean exports and $0.7 billion increase in passenger car exports.

Imports decreased by $6.5 billion to $210.7 billion for the month. Industrial supplies and materials imports decreased by $2.3 billion as crude oil imports fell by $1.4 billion, while capital goods imports fell $3 billion as computer accessories, semiconductors and civilian aircraft imports dropped for the month.

Stocks

Southwest Airlines (LUV, +2.24%) on Wednesday cut its guidance for current-quarter sales due to flight cancellations, following the global grounding of the Boeing 737 Max 8 aircraft (BA). The company said it expects about 9,400 flight cancellations between mid-February and March 31, including 2,800 as a result of the grounding of the 737 Max. The company now sees first-quarter 2019 available seat mile growth – a closely watched metric for airlines’ sales potential – to be 1%, versus earlier guidance of between 3.5% and 4%. Southwest also said it expects to see unit costs jump 10% year-over-year, higher than the previous forecast of 6%.

Shares rose after Boeing on Tuesday afternoon unveiled a set of software and other fixes to the 737 Max 8 jet, which the company intends to send to the Federal Aviation Administration later this week for certification approval.

Centene (CNC, -5.01%) has agreed to buy managed health-care provider WellCare Health Plans (WCG) in a deal valued at more than $15 billion. The deal, expected to close in the first half of 2020, will help Centene boost its government-backed health-care business, which is currently focused on Medicaid and Obamacare coverage but will soon gain WellCare’s Medicare platform. Centene offered $305.39 per share in cash and stock for WellCare, representing an about 32% premium over WellCare’s closing price as of market close Tuesday.

Morning Brief

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck

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