S&P 500 index heads toward worst month in more than three years
U.S. stocks declined Monday, with the Standard & Poor’s 500 Index on the verge of its worst month in more than three years, as investors harbor concerns about slowing global growth and the impact of a potential interest-rate increase by the Federal Reserve as soon as September.
Energy companies in the benchmark dropped as crude oil slid, with Apache Corp. and Diamond Offshore Drilling Inc. down at least 3.8 percent. Chevron Corp. slumped 2 percent after its biggest weekly gain since February. Dow Chemical Co. and DuPont Co. paced a decline in raw-materials shares, with each losing more than 1.2 percent. Phillips 66 bucked the trend in energy, rising 2.6 percent as Warren Buffett’s Berkshire Hathaway Inc. has amassed a $4.5 billion stake in the oil refiner.
The S&P 500 lost 0.6 percent to 1,977.09 at 10:54 a.m. in New York, after earlier falling as much as 1.2 percent. The Dow Jones Industrial Average sank 99.52 points, or 0.6 percent, to 16,543.49. The Nasdaq Composite Index slipped 0.4 percent.
“People are happy to tiptoe this week,” said Steve Bombardiere, an equity trader at Conifer Securities LLC in New York. “There were a lot of people who wanted to buy a correction, but after last week they paused and are thinking about how long it is going to last. There’s so much emotion right now and in this environment you can come in any morning and have something out of Europe or Asia crossing us and that’s what causes us to move.”
The S&P 500 is down 6 percent this month, on pace for the most since May 2012, as China’s currency devaluation earlier this month spurred concern over global growth, erasing more than $5.3 trillion in equity market values worldwide. The benchmark’s 0.9 percent gain last week masked a volatile period in which the S&P 500 plunged the most since 2011 to enter a correction, only to rally more than 6 percent over two days for its best back-to-back gains since the beginning of the bull market in 2009.
The Chicago Board Options Exchange Volatility Index rose 8.6 percent Monday to 28.30. The measure of market turbulence known as the VIX is on its way to a record monthly jump, up 131 percent. More than $2 trillion of share value was erased from U.S. markets between the end of July and the lowest levels of last week, a sum equal to roughly two years of S&P 500 earnings, data compiled by Bloomberg show.
While August ranks in the middle among months based on share performance, it has produced some of the worst returns of the year since 2009. During the week ended August 12, 2011, the S&P 500 alternated between gains and losses of at least 4 percent for four days, something never seen in 88 years of data compiled by Bloomberg. In 2013, the S&P 500 fell 3.1 percent in August, one of only two months of negative returns in a year when the index surged 30 percent.
Despite this month’s equities rout, remarks by Federal Reserve Vice Chairman Stanley Fischer suggested the central bank hasn’t ruled out raising interest rates when the Federal Open Market Committee gathers on Sept. 16-17. Bets on a September liftoff climbed after Fischer said there is “good reason” to believe inflation will accelerate. Traders are now pricing in a 38 percent chance the central bank will act in September, up from a one-in-four chance last Wednesday.
The Fed has said it will be appropriate to raise rates when it has seen some further improvement in the labor market and is “reasonably confident” inflation will move back to its 2 percent target over the medium term.
Source: Bloomberg
