Wall St. Weighs the Effect of Weaker China and Stronger U.S.

The world’s two largest economies — China and the United States — are moving in sharply different directions. Both are a risk to financial markets.

Investors are wary of China’s weakening growth , deflation and precarious real estate market , but they have largely shrugged off these concerns so far. Investors are, however, flinching at signs that the U.S. economy is unexpectedly strong, which could prompt a stronger response by the Federal Reserve as it tries to rein in inflation.

The S&P 500 stumbled on Tuesday, falling 1.2 percent and extending the decline recorded this month to more than 3 percent. […]

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