Not a pretty morning for equity markets around the world.  Stocks are lower around the globe this morning, and poorly received earnings reports from 3M (MMM) and Caterpillar (CAT) have only made matters worse for US equities heading into the opening bell.  CAT is on pace for its worst earnings reaction day in over three years, while MMM is on pace for its worst earnings reaction day since at least 2001.  Combined these two stocks are set to account for 175 of the Dow’s 400 point decline.

When it comes to narratives to explain today’s weakness in US equities, before the poorly received reports from MMM and CAT, the negative reversal in China from Monday’s big gain was cited as a catalyst, and we found that a bit puzzling.  After all, weren’t US equities down yesterday?

There’s a number of factors behind the weakness in US stocks, but they are all contributing to the same outcome – slower global growth.  Just today, the Bloomberg World Index which tracks equities on a global scale, traded to a new 52-week low and is down over 13% from its high earlier this year. At the same time that the rest of the world seems to be slowing, though, the market is concerned with the FOMC, which has actually turned up the hawkish tone in recent weeks and increasingly appears to be on auto-pilot with rates to the upside.  Slowing growth and tighter monetary policy is never a good mix.

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