Worst day for stocks in 18 months as global woes hit
U.S. stocks declined for a third day in a row on Thursday, with the S&P 500 lapsing into negative terrain for the year, as an ongoing rout in emerging markets intensified worries over global economic growth.
"Investors are anxious about conditions internationally -- China and the emerging-markets complex -- that sentiment has crystallized in the last several weeks of trading activity, and once things started to break down, they deteriorated pretty quickly," said Mark Luschini, chief investment strategist at Janney Montgomery Scott.
That said, the worst daily loss for U.S. equities since early February 2014 has the S&P 500 "down 4 percent from the [May] high, we're not down 40 percent," Luschini added in putting today's slide in perspective.
The Standard & Poor's 500 (spx) closed down 44 points, or 2.1 percent, at 2,036, its low point for the day and wiping out its gain for the year. The Dow industrials (dji) also ended at a session low, dropping 358 points, or 2.1 percent, to 16,991. That's the blue-chip benchmark's biggest drop in percentage terms since February of 2014. The Nasdaq Composite (comp) shed 142 points, or 2.8 percent, to 4,877, it's largest drop in percentage since April of 2014.
Consumer discretionary led declines among the S&P 500's major sectors, all 10 of which were in the red.
Tesla Motors (TSLA) dropped 5.1 percent, or $13.07, to $242.18 after the electric-car maker said underwriters of its secondary stock sale exercised their option for more shares, which were sold at a discount.
Walt Disney (DIS) fell after the entertainment conglomerate was downgraded to market perform from outperform by Sanford Bernstein. Shares of Disney closed down 6 percent, or $6.44, to $100.01.
The sell-off in emerging markets continued as Kazakhstan ceded its currency trading peg, following in Vietnam's footsteps in the wake of China's devaluation. Slowing growth in China and softness in currencies came into play as economists cut global growth estimates.
"The huge depreciation of currencies in Asia, Latin America, and elsewhere in the emerging world has damaged the creditworthiness of households and businesses that have borrowed dollar-denominated loans," Nariman Behravesh, chief economist at IHS Global Insight, and Sara Johnson, a senior research director at IHS, wrote in research released Thursday. "The big drag from the emerging world will continue into next year, even as growth in the developed world holds up."
The unraveling of overseas markets and slower growth worldwide could prompt the Federal Reserve to postpone its first interest-rate hike since 2006.
"As long as China's economy is decelerating, that is something the Fed would take into account," Luschini said.
Domestic economic reports were mixed. U.S. leading economic indicators declined 0.2 percent last month, according to the Conference Board's index, a gauge of what's ahead for the next three to six months.
Figures from the National Association of Realtors found existing-home sales climbed in July for a third consecutive month, hitting a more than eight-year high, and offering further evidence of strength in the housing market.
Contract closings rose 2 percent to a 5.59 million annualized rate from June's revised 5.48 million rate, the NAR figures showed.
"The creation of jobs added at a steady clip and the prospect of higher mortgage rates and home prices down the road is encouraging more households to buy now," Lawrence Yun, the trade group's chief economist said in a statement.
Applications for jobless benefits increased by 4,000 to 277,000 last week, remaining under the 300,000 level viewed as illustrating a healing labor market.