China's slump weighs on US stocks

China's weak economy drove down commodity prices Tuesday, as well as shares of companies with big business ties to the People's Republic.

Why it matters: The S&P 500 has rallied this year as the odds of a U.S. downturn seemed to shrink — but a deep downturn in the world's second-largest economy could still sting American markets.

The latest: China's central bank unexpectedly cut interest rates this week as disappointing economic updates on its retail and industrial sectors highlighted the country's struggles.

• The decision to cut rates underscored a growing sense of concern among Chinese policymakers about the scale of the economic issues they face.

The impact: Prices for key industrial commodities like oil, copper and nickel — which China's economy devours less of when weak — all fell on Tuesday, weighing on commodity producers in the U.S.

• Stocks in the energy sector and the materials industry (think chemical companies) were the worst two performers of the 11 "sectors" that make up the S&P 500. The index as a whole shed 1.2% on Tuesday, its second-worst day of the month.
• Some companies that derive a large share of their sales from China — including Estée Lauder, Western Digital and Tesla — also fell more than 2%.

Yes, but: While China's slowing growth is emerging as a concern for investors, the buoyant S&P 500 is still up about 16% in 2023.