GLOBAL MARKETS-Stocks, commodities pulled lower on growth worry

29 Sep 2015 | Author: | No comments yet »

Health-Care Shares Drive Stock Selloff.

The Dow Jones Industrial Average dropped 312.78 points, or 1.9%, to 16001.89. 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. The S&P 500 SPX, -2.57% 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. Last week, biotechnology stocks fell after Hillary Clinton targeted specialty drug makers, saying in a tweet that she would propose a plan to counter “price gouging” of certain drugs. “The language environment in [pharmaceutical pricing] is going to be negative in the space,” said Jeffrey Yu, head of single stock derivatives trading at UBS AG.

Investors are “naturally…going to express some type of concern.” James Hartwell, president of Deer Park, Ill.-based Essex LLC, said he has reduced exposure to the biotechnology sector by 15% this year because the sector had appreciated so much. “It’s been performing so well,” he said, adding that his strategy for the remainder of the year is to “just buy into the weakness of companies you want to own in the long term.” Energy and raw-material producing companies also posted sharp declines on Monday as commodity prices fell following a report showing industrial profits in major commodity consumer China fell 8.8% in August from a year ago. Concern over a slowdown in China, the world’s second-largest economy, and its potential impact on the Federal Reserve’s plans to normalize monetary policy after years of rock-bottom rates, has fueled market volatility in recent weeks. 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. 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. The iShares Nasdaq Biotechnology ETF IBB, -6.33% a measure of the biotech’s performance, sank 7.3% Monday and was on track for its worst single-session decline in four years.

Slumping commodities prices, including a sharp fall in the price of crude oil CLX5, -2.82% 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. 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. 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. Movers and shakers: Energy Transfer Equity ETE, -12.69% plans to buy, then combine with, Williams Companies WMB, -12.12% after agreeing to a $37.7 billion deal.

U.S.-listed shares of Volkswagen AG VLKAY, -6.66% dropped more than 7% after German prosecutors opened a fraud investigation into former CEO Martin Winterkorn.

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