MW: U.S. stocks tumble as China, North Korea roil markets
U.S. stocks opened lower Wednesday as slumping oil prices, weak Chinese economic data and reports of a nuclear test in North Korea unnerved investors around the globe.
The Dow Jones Industrial Average DJIA, -1.07% slumped 224 points, or 1.3%, to 16,933, while the S&P 500 index ESH6, -1.42% slid 24.14 points, or 1.2%, to 1,992 All of the S&P 500’s 10 sectors were in negative territory, led by a 2.7% drop in energy stocks.
Meanwhile, The Nasdaq Composite Index NQH6, -1.36% lost 55.27 points, or 1.1%, to 4,838.
The biggest factor rattling markets early appeared to be North Korea’s announcement that it had successfully detonated a hydrogen bomb late Tuesday New York Time after monitors detected seismic activity near the country’s northeastern coast. If true, the test would be the country’s first successful test of the more powerful weapon.
Steve Chiavarone, associate portfolio manager at Federated Investors, said concerns about global stability and economic growth have loomed large over investors so far this year.
“The year is three days old, and we’ve already gotten two new things -- and one old thing -- to worry about,” Chiavarone said, referring to rising tensions between Iran and Saudi Arabia, reports of a nuclear test in Korea and signs of economic sluggishness in China.
On the bright side, Chiavarone said U.S. data continue to improve, proving to market participants that the U.S. economy is resilient enough to withstand these international pressures.
In the latest batch of Chinese data, the purchasing-managers index for the country’s services sector dropped to a 17-month low in December. Markets in Asia fell in response, with the Hang Seng Index HSI, -0.98% and the Nikkei 225 NIK, +140.00% closing lower.
The services data come after a disappointing reading on China’s manufacturing sector on Monday prompted Chinese policy makers to guide their currency lower, prompting a global market rout.
Data: Investors looked ahead to minutes from the Federal Reserve’s December meeting, due later in the day.
Investors shrugged off a report from Automatic Data Processing Inc. showing the strongest gain in private-sector employment all year during December.
Employers added 257,000 jobs in December, according to the data. Economists polled by MarketWatch expect Friday’s nonfarm payrolls report to show that 215,000 new jobs were added.
Stocks held their losses after the Commerce Department reported that goods manufactured in U.S. factories declined by 0.2% in November. Meanwhile, the Institute for Supply Management’s services index fell 0.6 points to 55.3% in December. Economists polled by The Wall Street Journal had forecast a December reading of 56.3. A reading above 50 represents economic expansion.
Oil blues: Brent crude oil LCOG6, -4.04% fell to an 11-year low Wednesday, while West Texas Intermediate crude oil trading on the New York Mercantile Exchange CLG6, -3.28% —the U.S. benchmark—was nearly 4% lower early Wednesday. The price movement didn’t bode well for energy shares.
The deepening rout in oil slammed energy companies. Shares of Transocean Ltd. RIG, -4.03% fell 4%. Schlumberger Ltd. SLB, -0.39% fell 2.1%, and Chevron Corp. CVX, -2.82% dropped 2.2%.
Movers: Shares of Apple Inc. AAPL, -0.56% lost 4.1% after reports on Tuesday that the company plans to scale back production of its iPhones, pushing the stock price close to $100. In addition, the president of Casio Computer Co. 6952, -1.49% said the Japanese watchmaker threatens to outshine Apple with new smartwatch models, according to The Wall Street Journal.
AutoNation Inc. AN, -9.98% slumped 13.3% after the car dealership’s Chief Executive Mike Jackson warned of a slowdown in premium car sales.
Yahoo! Inc. YHOO, -0.28% lost 1.3% after major shareholder Starboard says shareholders have lost confidence in Yahoo’s management and board.
Pioneer Natural Resources Co. PXD, -6.61% fell 7.9% after the oil exploration company late Tuesday announced a 10.5-million-share offering.
Other markets: European markets were also sharply lower, hit by the same factors as U.S. equities.
Gold GCG6, +1.02% on the other hand, benefited from the risk-off sentiment and climbed for a fourth straight session on the back of safe-haven demand.
The dollar DXY, +0.09% traded mixed against other major currencies.
