Wall Street down 1 pct, Dow and S&P slip into red for the year

20 Aug 2015 | Author: | No comments yet »

Stocks plunge early on global sell-off, Dow down over 200 points.

A global market sell-off sent U.S. stocks plunging on Thursday morning, as investors worried about flagging oil prices and uncertainty around impending interest rate hike as well as concerns overseas with China’s struggling economy.

U.S. stocks fell for a third straight session, putting the Dow industrials on course for their lowest finish of the year, as the Federal Reserve offered no clear signal on the path of rate increases amid signs of slowing economic growth. The Dow Jones Industrial Average exhibited a decent amount of volatility early Thursday, dropping more than 200 points shortly after the markets opened and then briefly rallying before plunging once again.

Minutes from last month’s Fed meeting, which were released Wednesday, showed officials are divided on when to raise interest rates, seen as a possibility as soon as September. Some Fed officials pointed to slowing growth in China’s once-booming economy as a reason for caution. “People are worried about the Fed,” said Rick Fier, director of execution services at Conifer Securities. “People want the Fed raising rates [in response to] the economy getting better.” Ultralow interest rates have helped spur a rally in stocks since the financial crisis, which has prompted investors to monitor closely the Fed’s timeline for rate increases. The Dow is on pace to record its worst trading day in more than a month — it lost 261 points on July 8 — and the index has dropped about 560 points, or 3.2%, since the start of August.

At the same time, if the Fed decides to delay raising interest rates on growth concerns, that could weigh on the outlook for corporate profits and stock gains. The Chicago Board Options Exchange Volatility Index (VIX), a measure of market volatility that is often referred to as the “fear index,” is up nearly 13% on the day. This morning’s market in the U.S. turbulence follows a day of big losses abroad, where Germany’s DAX fell 2.2% and the Shanghai composite in China dropped more than 3%.

Today’s selloff pushed the Dow more than 1,200 points below its all May 19 all-time closing high of 18,312.39 and nudged the broad S&P 500 below its long-term trend line known as the 200-day moving average. The level remained historically low, suggesting the labor market continues to improve. “If the Fed does not raise rates in September, does the market therefore assume that growth is too slow?” said Ernie Cecilia, chief investment officer at Bryn Mawr Trust. A barrel of U.S. based crude is flirting with falling below the $40 per barrel mark for the first time since early 2009, which marks a fresh 6 1/2-year low. The main risk facing markets continues to be China and signs that its economy — the world’s second biggest — is slowing faster than previously thought.

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