U.S. Stocks Tumble as China Equities Rout Spurs Growth Concern

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The Standard & Poor’s 500 Index fell to a four-month low amid concern that China’s equities rout will hurt growth in the world’s second-largest economy, and Federal Reserve minutes indicated officials acknowledged the potential risks from overseas crises.

Raw-materials, banks and semiconductor shares were among the worst performers. Alcoa Inc. slid 5.1 percent during regular trading before reporting results. Bank of America Corp. and Citigroup Inc. sank more than 2.6 percent. Apple Inc. and Yahoo! Inc. slumped at least 2.4 percent while Intel Corp. declined 1.3 percent.

The S&P 500 fell 1.7 percent to 2,046.68 at 4 p.m. in New York, its lowest close since March 11. The Dow Jones Industrial Average lost 261.49 points, or 1.5 percent, to 17,515.42, a five-month low. The Nasdaq Composite Index declined 1.8 percent. About 7.3 billion shares traded hands on U.S. exchanges Wednesday, 14 percent above the three-month average.

“All the attention is on China and Greece right now,” said Ninh Chung, who helps manage $20 billion for corporate accounts at Silicon Valley Bank in San Francisco. “The bigger focus will be China. As we see markets decline I think there will potentially be spillover effects into other markets, just given how large the Chinese economy is.”

The New York Stock Exchange halted trading for 3 1/2 hours because of a computer malfunction, forcing traders to route orders elsewhere. The suspension, lasting from 11:32 a.m. to just after 3 p.m., dropped the largest U.S. share platform out of the network of trading systems that make up the American equity market.

Members of the Federal Open Market Committee “mentioned their uncertainty about whether Greece and its official creditors would reach an agreement and about the likely pace of economic growth abroad, particularly China and other emerging market economies,” according minutes of June 16-17 meeting.

Fed Minutes

All members but one “indicated that they would need to see more evidence that economic growth was sufficiently strong” before raising interest rates. Fed officials in June forecast they would raise rates twice this year, while lowering their outlook for subsequent increases. Since then, global markets have been shaken by the rising risk of a Greek exit from the euro and a rout in Chinese stocks.

China’s market plunge has raised concerns about a broader impact on global economic growth. The country has unveiled new market-boosting measures almost every night over the past 10 days as policy makers seek to maintain confidence in the nation’s leadership and prevent a crash from weighing on economic expansion.

President Xi Jinping’s government is ramping up efforts to combat the rout as policy makers seek to maintain confidence in the nation’s leadership and prevent a crash from weighing on the weakest economic expansion since 1990.

China, Greece

Meanwhile, Greece is working against the clock on a package of proposed reforms to convince European leaders headed by German Chancellor Angela Merkel that it can keep the euro. The country has until midnight Thursday in Brussels to present measures to reform its economy and cut spending in exchange for a new European bailout.

Greece’s financial crisis and now China’s equity market slide have diverted attention from U.S. economic data and the path of the Fed’s monetary policy. The S&P 500 is down 4 percent since its May record.

“The convergence of China as well as Greece is putting risk takers on their heels,” said Chad Morganlander, a money manager in Florham Park, New Jersey for Stifel Nicolaus & Co., which oversees about $170 billion.

Earnings Season

Earnings will also bring investors more data to consider. After the market closed, Alcoa, the largest U.S. aluminum producer, reported second-quarter earnings that missed analysts’ estimates after aluminum prices fell amid surging exports from China. Shares rose 0.5 percent in after-hours trading as of 4:59 p.m.

Results from Johnson & Johnson, JPMorgan Chase & Co. and Intel Corp. are all due next week. Profit at S&P 500 companies contracted 6.5 percent in the second quarter, analysts’ estimates compiled by Bloomberg show.

“I think what’s really important for earnings season is not so much what happened in the second quarter, but what the guidance looks like,” said John Canally, chief economy strategist at LPL Financial Corp. in Boston. “Is there impact from disruptions in China? Is there impact from the European economy? We’re going to be watching those two things really closely.”

GM, Chipmakers

The Chicago Board Options Exchange Volatility Index added 22 percent to 19.66, its highest since January. The gauge, known as the VIX, rose 20 percent last week, the most in five months.

All of the S&P 500’s main groups declined, with nine of the industries down more than 1 percent. Phone companies, consumer discretionary, raw-materials and energy all dropped at least 1.8 percent.

Alcoa posted its worst slide since March to lead declines in materials shares before unofficially kicking off the earnings season. Miner Freeport-McMoRan Inc. lost 4.4 percent, falling more than 3 percent for a third day, to a six-year low.

General Motors Co. fell 5.1 percent to its lowest this year, while Ford Motor Co. lost 3.2 percent, also to a 2015 low. Auto-parts maker Delphi Automotive Plc slumped 6.9 percent, its biggest drop in more than three years.

Semiconductors extended their losing streak to a third day, with Qorvo Inc. and Skyworks Solutions Inc. down at least 4.8 percent to pace declines. The Philadelphia Stock Exchange Semiconductor Index fell 2.6 percent, down 12 percent from a June peak.

United Continental Holdings Inc. lost 2.7 percent after a router malfunction caused a computer fault that disrupted travel for thousands of the airline’s fliers. The Dow Jones Transportation Average fell 2.2 percent, the most since Jan. 30, to its lowest since October.

China Exposure

Energy shares in the S&P 500 dropped with oil as crude fell on speculation a supply glut will linger at the same time investors shun risky assets amid the Greek crisis and Chinese stock selloff. Chevron Corp. decreased 1.8 percent, while Transocean Ltd. and Phillips 66 declined at least 3.6 percent.

Wynn Resorts Ltd. fell 6.5 percent, and Yum Brands Inc. lost 3.1 percent to a two-month low. Both companies derived more than 50 percent of their revenue from China during fiscal 2014, according to data compiled by Bloomberg.

The iShares China Large-Cap exchange-traded fund, which tracks the FTSE China 50 Index, sank 7.2 percent to its lowest since November, and its biggest drop in since Jan. 2009.

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