BLBG: U.S. Stocks Decline With Global Markets as China Devalues Yuan
U.S. stocks slid, following equities’ biggest gain since May, as China’s currency devaluation sparked concern across global markets that the world’s second-largest economy is headed for a deeper slowdown.
Companies that rely heavily on exports to China, including auto and luxury goods makers, retreated. General Motors Co. and Tiffany & Co. lost more than 2.3 percent. Apple Inc. sank 2.5 percent. Commodity producers from Freeport-McMoRan Inc. to Dow Chemical Co. fell at least 2.8 percent amid concerns about China’s growth. Google Inc. advanced 5.3 percent after saying it will reorganize into a holding company called Alphabet Inc.
The Standard & Poor’s 500 Index declined 0.8 percent to 2,087.66 at 10:06 a.m. in New York, and fell below the benchmark’s average prices during the past 50 and 100 days. The Dow Jones Industrial Average dropped 176.82 points, or 1 percent, to 17,438.35. The Nasdaq Composite Index slipped 0.7 percent.
“The driving forces today continue to be macro-oriented with China the most important,” said Tom Wright, the New York-based director of equities at JMP Securities. “We spend a lot of time obsessing over Greece or Puerto Rico, but China is a much bigger economy and a much bigger problem to the global economy and devaluing the currency is shaking people up.”
China devalued the yuan by 1.9 percent, the most in two decades, after data this month showed a plunge in exports, weaker-than-estimated manufacturing and a slowdown credit growth. The surprise move rippled through global markets, sparking selloffs in emerging-market currencies, commodities, and auto and luxury stocks with exposure to China.
Data, Earnings
Investors are assessing economic data to gauge when the Federal Reserve will raise interest rates for the first time since 2006. A report today showed worker productivity struggled to gain traction in the second quarter. Less efficiency limits how quickly the economy can grow without spurring inflation, adding another variable for policy makers to consider in deciding when to raise rates.
Investors will also look to corporate releases, as the earnings season draws to a close. Cisco Systems Inc. and News Corp. are among companies posting quarterly updates this week.
Of the S&P 500 members that have already reported, 74 percent beat profit estimates and about half topped sales projections. Analysts now project a more modest drop in second-quarter earnings, calling for a 2.1 percent fall instead of a 6.4 percent decline a month earlier.
The Chicago Board Options Exchange Volatility Index climbed 9.4 percent Tuesday to 13.38, after falling 8.7 percent Monday. The gauge, known as the VIX, rose 10 percent last week after posting its biggest monthly drop since February.
Eight of the S&P 500’s main groups fell today, with energy and raw-materials shares sliding the most and reversing gains yesterday that were the strongest in at least seven months. Phone companies and utilities advanced.
