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Dow cuts sharp losses but still closes down 45 points

Adam Shell
USA TODAY

Stocks cut sharp losses but still closed lower Thursday as investors reacted to more bad news, with China trade data showing a sharp decline, interest rate hikes coming soon and ongoing investor edginess over corporate earnings as the reporting season rolls on.

Traders work on the floor of the New York Stock Exchange on Oct. 7, 2016.   (Photo by Spencer Platt/Getty Images)

The downbeat news and weak sentiment pushed the Dow Jones industrial average down as much as 185 points earlier in the session before recovering some and closing down 45 points, or 0.3%, to 18,099. The broad Standard & Poor's 500 stock index fell 0.3% to 2133 and the Nasdaq composite was off 0.5% to 5213.

Giving investors pause was overnight data out of China that showed exports in the world's second-biggest economy slumping 10%, raising fresh worries over the state of the global economy. "Trade statistics were brutal...there's no other way to put this: a grim report," Bespoke Investment Group told clients in a pre-market report.

Investors were also reacting to the release yesterday of the minutes of the Federal Reseve's September meeting, where the U.S. central bank said a strong labor market and improving economy in the second half of 2016 "strengthened" the case for an interest rate hike later this year, and "relatively soon." Wall Street is now digesting the reality of a coming rate hike and pricing in higher borrowing costs, even though the Fed reiterated in the minutes that any rate increases will be "gradual."

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New York Fed president William Dudley also said Wednesday that the Fed can raise rates gently, but "evidently the markets don't believe that," says Jeffrey Saut of money-management firm Raymond James.

In economic news, Americans filing for first-time unemployment benefits were unchanged at 246,000, but still at a four-decade low.

Oil prices bounced around with U.S. benchmark crude eventually closing up rose 18 cents to $50.36,

In currency news, the dollar edged down 0.1% vs. a basket of foreign currencies and the British pound dipped 0.1% vs. the dollar and remains at a multi-decade low against the dollar.

Wall Street is still anxious to see if the S&P 500 can avoid what Thomson Reuters says could be its fifth straight quarter of negative profit growth. Given the stock market's pricey valuation -- it is trading above its historical valuation level -- Wall Street says stronger earnings are needed to keep the market at current levels.

In individual stock news, shares of Wells Fargo (WFC)  were 1.3% lower after CEO John Stumpf stepped down last night in the aftermath of the scandal at the bank in which bank employees opened up accounts without customers' permission in an effort to boost revenue and meet internal sales targets. Wells Fargo reports third-quarter earnings tomorrow, as does JPMorgan Chase and Citigroup.

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Asian markets fell on the China trade news. Japan's Nikkei 225 declined 0.4%, Hong Kong's Hang Seng index dipped 1.6% and mainland China's Shanghai composite edged up 0.1%.

In Europe, shares were down across the board, with the broad Stoxx Europe 600 index 0.9% lower.

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