China growth worry drags down global stocks, commodities

28 Sep 2015 | Author: | No comments yet »

Stocks Sharply Lower on China Concerns.

Losses accelerated for U.S. stocks Monday as concerns about slowing economic growth in China and mixed domestic economic data unnerved investors and carnage in the biotech sector extended into a second week. “I think what we have here is a continuation of the selling we saw on Friday,” said Joe Saluzzi, co-founder and co-head of equity trading at Themis Trading, pointing to a sharp selloff that gripped markets toward the end of Friday’s trading session that was pegged to weakness in biotech and health-care stocks.U.S. stocks fell sharply in afternoon trade Monday, as fresh evidence of an economic slowdown in China added to investors’ fears about the outlook for global growth. The S&P 500 SPX, -2.53% fell 49 points, or almost 2.5%, to 1,882, sliding below the 1,900 level for the first time since late August, when the market was rocked by China’s move to devalue its currency.

Energy and raw-materials producers were among the session’s biggest decliners as commodity prices fell following a report showing China’s industrial profits dropped 8.8% in August from a year earlier. Shares in commodities giant Glencore GLNCY -26.83 % PLC sank more than 29% to an all-time low as the mining company continued to suffer from a slump in commodity prices and concerns over its burgeoning debt-laden balance sheet. Katz says he has roughly halved exposure to emerging-market stocks and fixed-income investments since mid-August and is planning to focus on U.S. stocks with little exposure to international markets.

Some investors interpreted the Fed’s decision to keep short-term rates near zero at its meeting in September as a lack of confidence in the U.S. economic recovery. The iShares Nasdaq Biotechnology ETF IBB, -5.94% a measure of the biotech’s performance, sank 7.3% Monday and was on track for its worst single-session decline in four years. Investors focused on Federal Reserve Bank of New York President William Dudley, who said Monday the central bank will likely raise rates later this year. Slumping commodities prices, including a sharp fall in the price of crude oil CLX5, -2.47% and worries about London mining giant Glencore PLC GLEN, -29.42% which plunged nearly 30% in London, underscored concerns about economic growth outside of the U.S. “The market is just not in a really good mood right now,” said Randy Frederick, managing director of trading and derivatives at the Schwab Center for Financial Research. On Monday analysts pointed to reports citing Chinese government statistics that showed profits in the nation’s industrial companies plunged 8.8 percent last month.

Investors are worried that a slowdown in emerging markets will start to hurt U.S. companies that rely on overseas demand for a large portion of their profits. THE QUOTE: “Whenever the market is down, the first place to look these days is China,” said John Manley, chief equity strategist at Wells Fargo Fund Management. “Right now, we need evidence that China is not slowing that much and that profits are still going to be OK.” ALCOA SPLIT: Alcoa bucked the downward trend after announcing that it will split into two independent companies. Manley said investors are awaiting third-quarter corporate results due in the next few weeks to determine where to place their bets as hand-wringing about the health of China overshadows corporate fundamentals.

Data and Fed speakers: A gauge of pending home sales fell to its lowest level in five months, which points to hesitation from buyers amid rising prices, talk of rates being increased and a dearth of homes on the sales block. Spending on cars and back-to-school purchases helped bolster purchases at retailers, but a closely watched measure of inflation by the Federal Reserve—the so-called PCE price index—showed little sign of moving toward the Fed’s target 2% level.

In the afternoon, Chicago Fed President Charles Evans, speaking at the Marquette University Business Leaders Forum in Milwaukee, said the Fed should be in no hurry to raise interest rates. VW LOWER AGAIN: Volkswagen shares were down 8.2 percent as German prosecutors opened an investigation against the company’s former CEO, Martin Winterkorn, to establish what his role was in the emissions-rigging scandal.

San Francisco Fed President John Williams, also a voting member, is due to talk about the economic outlook at the UCLA Anderson Forecast Center in Los Angeles at 5 p.m. The investigation aims to determine who was responsible for selling vehicles with manipulated emissions data, prosecutors in Germany said in a statement. Movers and shakers: Energy Transfer Equity ETE, -11.79% plans to buy, then combine with, Williams Companies WMB, -10.72% after agreeing to a $37.7 billion deal. BONDS AND CURRENCIES: U.S. government bond prices rose, pushing the yield on the 10-year Treasury note down to 2.10 percent from 2.16 percent on Friday.

Earlier, Audi said 2.1 million of its vehicles have the emissions-rigging software installed, and the German motor authority gave VW until Monday to come up with a plan to fix affected cars. U.S.-listed shares of Novo Nordisk AS NVO, -1.15% climbed 2.8% after the Food and Drug Administration approved the Danish drug maker’s long-acting Tresiba insulin product.

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