S&P 500 goes negative for year; stocks tumble on China yuan turmoil
U.S. stocks fell sharply Wednesday, with the S&P 500 descending into negative territory for the year for the first time since mid-July, as a second day of weakness for the Chinese yuan continued to send shock waves through global markets.
Traders were unloading telecommunication and financial stocks the most as worries about China—the world’s second-largest economy—continued after the country intervened on Wednesday to manage the devaluation of the yuan USDCNY, +0.9438%
On Tuesday, the People’s Bank of China set in motion what the central bank described as a pledge to let market forces dictate the currency’s value.
Beijing’s actions have had spillover effects on global markets, raising concerns about the economic health of the country, which is one of the largest importers of goods and buyers of services.
The Dow Jones Industrial Average DJIA, -0.99% was down 216 points, or 1.2%, at 17,188, after being off by as many as 277 points. The blue-chip index is eyeing a drop for nine out of the past 10 days.
The S&P 500 SPX, -0.94% was off nearly 24 points, or 1.1%, at 2,061, after being off by as many as 32 points, and venturing into negative territory for the year. The index ended 2014 at 2,058.90.
The Nasdaq Composite Index COMP, -1.13% shed 58 points, or 1.2%, at 4,978, after being down as many as 91 points. The tech-heavy Nasdaq has retreated from the psychological significant level of 5,000 reached back in March.
The main stock benchmarks also suffered from sharp selling pressure on Tuesday, with the Dow tumbling more than 200 points and the S&P 500 index dropping 1% and the Nasdaq Composite Index falling 1.3%. The losses came after the People’s Bank of China’s currency-devaluation maneuvers.
The PBOC said Tuesday’s decision was a one-off move, but on Wednesday the PBOC allowed the yuan to fall further, essentially devaluing the currency for a second consecutive day.
A weaker yuan is good for Chinese exporters, but bad for international companies that compete with Chinese companies or export goods to the world’s second largest economy, including car makers, luxury-goods firms and technology companies.
Apple Inc. AAPL, +0.32% pared losses on the day and was down 0.2% recently after being off by more than 3%. Apple posted a 5.2% decline Tuesday on China’s currency moves. The yuan devaluation makes the iPhone maker’s gadgets more expensive for Chinese buyers. Read: These are the 20 China-exposed stocks to avoid
Shares of other technology companies like chip maker Micron Technology Inc. MU, -0.17% off 0.2% and Qualcomm Inc. QCOM, -1.02% down 1.1%, were among the names falling on China.
Luxury handbag makers, including Salvatore Ferragamo SpA SFER, +0.00% which fell on Tuesday in the wake of the China news, were sinking a second day.
Analysts speculate that the yuan moves could force the Federal Reserve to delay its first rate hike.
Data and Fed speakers:
Job openings, the number of available jobs in June, fell even as companies hired more. There were 5.25 million job openings, down from 5.36 million in May.
Data on the federal budget for July is due at 2 p.m. Eastern.
Earnings: Shares of Macy’s Inc. M, -5.09% fell 4% after the company cut its outlook.
Alibaba Group Holding Ltd. BABA, -5.86% shares slumped after the Chinese e-commerce giant reported weaker-than-expected revenue for its fiscal first quarter.
And after the market closes, Cisco Systems Inc. CSCO, -1.78% and News Corp. NWS, -1.16% —the owner of MarketWatch, the publisher of this report—are slated to release earnings.
Movers and shakers: Shares of Warren Buffett’s Berkshire Hathaway Inc. BRK.B, -1.53% BRK.A, -1.57% slipped after Standard & Poor’s Ratings Services placed the company’s ratings on review following news the conglomerate will buy Precision Castparts Corp. PCP, -0.13% for about $32 billion. S&P’s move reflects, in part, uncertainty over how Berkshire will finance the deal.
Other markets: Crude oil CLU5, -0.32% erased earlier losses and rose after the International Energy Agency said demand for oil is increasing at its fastest pace in five years, boosted by an oil-price drop below $50 a barrel. Gold prices were moving higher as the metal drew haven bids.
The ICE dollar index DXY, -1.13% was down 1.2% as investors digested the continued slide in the Chinese yuan.
European markets were also sharply lower on the yuan news, with the Stoxx Europe 600 index SXXP, -2.70% off 2%.
Asian stock markets closed lower almost across the board.
Source: MarketWatch
