Wall Street drops as China data rattles investors

29 Sep 2015 | Author: | No comments yet »

10 stocks leading today’s S&P 500 decline.

Ongoing worries about the health of the Chinese economy and another big sell-off in drugmakers pushed the stock market back toward its lowest level of the year. North American stock markets closed sharply in the red Monday as more evidence of a continuing slowdown in China, the world’s second-largest economy, delivered a blow to commodity prices.The Nasdaq Composite has produced a bearish “death cross” technical pattern, joining the Dow Jones Industrial Average, the S&P 500 and the Russell 2000.

Energy and raw material companies dropped on reports that industrial profits at Chinese companies fell sharply in August, heightening worries about a slowdown in the world’s second-biggest economy. Health care stocks fell sharply as drugmakers extended a decline that began last week as lawmakers stepped up pressure on the industry over its pricing policies. The massive decline was led by the health-care sector, which lost more than 10 per cent, and metals and mining, which slipped more than nine per cent. Oil and metals prices fell after Chinese government statistics showed that profits at the country’s industrial companies plunged 8.8 per cent last month. “People traditionally buy gold for safety reasons, to diversify away from other assets.

The slowdown could start hurting U.S. companies that rely on overseas demand for a large portion of their profits. “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.” The Standard & Poor’s 500 index slipped 49.57 points, or 2.6 percent, to 1,881.77. The iShares Nasdaq Biotechnology ETF IBB, -6.33% a measure of the biotech’s performance, tumbled 6.3% and registered its worst single-session decline in more than four years. Meanwhile, in corporate news, Valeant Pharmaceuticals(TSX:VRX) — a heavily weighted stock on the TSX — fell by 16.3 per cent, or $43.20, to close at $221.81 after U.S. congressional Democrats asked to subpoena documents from the drugmaker related to massive price increases for two drugs. Slumping commodities prices, including a sharp fall in the price of crude oil CLX5, -2.69% 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. Congressional Democrats on Monday pressed a Republican committee chairman to force Valeant Pharmaceuticals, a Canadian drugmaker, to turn over documents tied to price hikes imposed for two heart drugs earlier this year.

The sector — a recent favorite of investors — slumped last week after Democratic presidential candidate Hillary Rodman Clinton announced a plan to tackle rising drug costs. Spending on cars and back-to-school purchases helped bolster purchases at retailers, but the Federal Reserve’s closely watched measure of inflation—the so-called PCE price index—showed little sign of moving toward the central bank’s target 2% level.

There’s no reason that this selling pressure should be as severe as it has been,” said Robert Pavlik chief market strategist at Boston Private Wealth. 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 6% after German prosecutors opened a fraud investigation into former CEO Martin Winterkorn. Federal Reserve Bank of New York President William Dudley said in an interview with The Wall Street Journal on Monday that he expects policymakers will raise rates this year.

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