- Financial, raw-material shares lead declines in S&P 500
- Nasdaq 100 erases most of drop in last 1.5 hours of trading
U.S. stocks fell, with Dow Jones Industrial Average tumbling more than 250 points, amid mounting concern that central-bank efforts to support growth are losing their potency.
The Standard & Poor’s 500 Index pared losses in the last hour-and-a-half of trading, after earlier falling as much as 2.3 percent, while the Nasdaq 100 Index erased most of its decline. Banks led the retreat, with Citigroup Inc. and Bank of America Corp. falling more than 6.5 percent. Boeing Co. tumbled 6.8 percent after people familiar with the matter said regulators are probing its accounting.
The S&P 500 dropped 1.2 percent to 1,829.08 at 4 p.m. in New York, extending declines to a fifth day, its longest losing streak since September. The benchmark fell to around the 1,810 level before rebounding. The Dow Jones Industrial Average lost 254.56 points, or 1.6 percent, to 15,660.18, as Boeing’s plunge knocked 54 points off the index.
“Central bank policies and the uncertainty around their effectiveness is the big macro concern right now,” said Leo Grohowski, who helps manage more than $184 billion in client assets as chief investment officer of BNY Mellon Wealth Management in New York. “There’s a large disconnect right now between what the Fed might do and what they’re saying and what the market is expecting. There’s a lot of Fed uncertainty back on the table reminiscent of late last summer.”
Signals by central banks from Europe to Japan that additional stimulus is at the ready are failing to ease worries that global growth will keep slowing. An initial rally in U.S. stocks evaporated in the final hour of trading on Wednesday as speculation that the Federal Reserve will hold off longer on raising interest rates gave way to renewed concern over the strength of the U.S. economy. Fed Chair Janet Yellen told Congress yesterday that recent market turbulence may weigh on the outlook for the economy if it persists.
The S&P 500 is 14 percent below its all-time high set in May, near its lowest level in two years. The Nasdaq Composite Index is about 18 percent below its record set in July amid a more than 15 percent drop so far this year.
Declines in banks have been the biggest source of pain for U.S. equities in the market’s latest rout -- a gauge of financial shares on the S&P 500 has slumped almost 18 percent just this year, to its lowest level since 2013. With global stocks breaching a level that constitutes a bear market, trading volumes remain high and volatility is on the rise.
“Energy companies have passed the ball to financials, because that’s where they get their money,” said John Manley, who helps oversee about $233 billion as chief equity strategist for Wells Fargo Funds Management in New York. “When problems spring up anywhere, they inevitably find their way back to the financial sector.”
The Chicago Board Options Exchange Volatility Index rose 7 percent Thursday to 28.14, closing at a five-month high. The measure of market turbulence known as the VIX has jumped 55 percent this year.
The U.S. earnings season hasn’t provided much of a relief even though more than three-quarters of companies that have reported so far have exceeded analysts’ profit estimates. Some 21 members of the S&P 500 are scheduled to release financial results today, including American International Group Inc. and CBS Corp. Analysts estimate S&P 500 earnings fell 4.5 percent in the fourth quarter, and will continue to contract in the following two periods.
While the S&P 500’s valuation of 15.2 times the forecast earnings of its members is in line with the average of the past five years, the measure has plunged 13 percent since the start of the year. The gauge remains more expensive than developed markets in Europe, where the Stoxx 600 Index trades for 13.4 times estimated earnings.
All of the S&P 500’s 10 main industries fell Thursday, with financial, raw-material and industrial shares down at least 2 percent. Consumer discretionary companies were little changed, while tech stocks closed 0.2 percent lower.
Banks in the benchmark fell 4.4 percent, the biggest one-day drop in more than five months. The group has lost nearly 13 percent this month.
Losses in Boeing weighed on industrial shares in the S&P 500 as well as the Dow. The U.S. Securities and Exchange Commission is investigating whether the company properly accounted for the costs and expected sales of two of its best known jetliners, according to people with knowledge of the matter. General Electric Co. and Union Pacific Corp. each lost at least 1.8 percent.
Cisco Systems Inc. rallied 9.6 percent, the most since May 2013, after predicting sales that may beat some analysts’ estimates. The gains helped blunt some of the pain in the Nasdaq Composite. Also helping, Tesla Motors Inc. added 4.7 percent after assurances that it’s on track with development of its long-awaited Model 3, while TripAdvisor Inc. surged 12 percent on a better-than-estimated quarterly profit. Expedia Inc. jumped 9.6 percent after forecasting earnings would grow as much as 45 percent this year.