Market Wrap: Wall Street Drops as China Slump Stokes Fears

NYSE Opens After Chinese Markets Take Massive Plunge
Spencer Platt/Getty Images
By Noel Randewich

NEW YORK -- Wall Street sank Monday, with the Nasdaq losing almost 1 percent after the steepest decline in Chinese stocks in eight years increased concerns that cooling growth in the world's No. 2 economy could hurt China's trading partners.

The Dow Jones industrial average finished at its lowest since February, the Nasdaq composite hit a four-week low and the benchmark S&P 500 ended at its lowest in over two weeks. In an additional negative sign, 480 stocks hit 52-week lows on the New York Stock Exchange, the most in one day since Oct. 15.

After Chinese stocks plunged more than 8 percent, the top securities regulator said Beijing would keep buying shares to stabilize the market as an unprecedented rescue plan already in place appeared to sputter.

U.S.-listed shares of Chinese companies slid, including Alibaba (BABA) and Baozun (BZUN).

%VIRTUAL-pullquote-It's hard to assess whether China single-handedly can deep-six the market.%Commodity prices resumed a downward spiral, with the Thomson Reuters CRB commodities index hitting a six-year low and oil a four-month low.

"It's hard to assess whether China single-handedly can deep-six the market," said Chuck Carlson, chief executive at Horizon Investment Services in Hammond, Indiana. "A significant slowdown in China impacts not just the U.S. but global players as well."

The Dow Jones industrial average (^DJI) fell 0.7 percent to end at 17,441.79 points. The Standard & Poor's 500 index (^GSPC) lost 0.6 percent to end at 2,067.75. The Nasdaq composite (^IXIC) dropped 1 percent to 5,039.78.

Nine of the 10 major S&P 500 sectors were lower, with the energy index's 1.4 percent fall leading the decliners.

Corporate Earnings

With second-quarter reports well under way, analysts expect overall earnings of S&P 500 companies to drop 0.3 percent and revenue to decline 3.9 percent, according to Thomson Reuters (TRI) data.

Such results could inflate already relatively pricey valuations. The S&P 500 trades near 16.9 times forward 12-month earnings, above the 10-year median of 14.7 times, according to StarMine data.

"Valuations are a concern right now," said Randy Frederick, managing director of trading and derivatives for Charles Schwab in Austin, Texas. "We really need to see corporate revenue growth."

The main event for U.S. markets this week is likely to be the two-day Federal Reserve meeting, the last before September, which still looms as the first possible date for an interest rate increase.

Teva Pharmaceutical's (TEVA) shares jumped 16.4 percent to a record high of $72 after it agreed to buy Allergan's generic drug business for $40.5 billion, giving up on its bid to buy Mylan. Allergan (AGN) rose 6.1 percent while Mylan (MYL) fell 14.5 percent.

Fiat Chrysler (FCAU) fell 4.9 percent after a U.S. auto safety watchdog announced a $105 million fine against the automaker over lapses in safety recalls.

On the NYSE, 2.73 stocks fell for every one that rose. On the Nasdaq, decliners outnumbered gainers 2.47 to 1.

The S&P 500 index posted 3 new 52-week highs and 58 lows; the Nasdaq composite saw 21 new highs and 246 lows.

-Tanya Agrawal contributed reporting.

What to watch Tuesday:
  • Standard & Poor's releases the S&P/Case-Shiller home price index for May at 9 a.m. Eastern time.
  • The University of Michigan releases its final survey of consumer sentiment for July at 10 a.m.
Earnings Calendar
These selected companies are scheduled to release quarterly financial results:
  • Aflac (AFL)
  • Ally Financial (ALLY)
  • BP (BP)
  • Corning (GLW)
  • D.R. Horton (DHI)
  • DuPont (DD)
  • Express Scripts (ESRX)
  • Ford Motor Co. (F)
  • Gilead Sciences (GILD)
  • JetBlue Airways (JBLU)
  • Merck & Co. (MRK)
  • Pfizer (PFE)
  • Reynolds American (RAI)
  • Sirius XM Holdings (SIRI)
  • Twitter (TWTR)
  • UBS (UBS)
  • United Parcel Service (UPS)
  • Wyndham Worldwide (WYN)
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