U.S. Stocks Sink as Oil Slumps to 4-Year Low; Gold GainsCallie Bost and Oliver Renick
The Standard & Poor’s 500 Index capped its worst three-day loss since 2011 as airlines sank on Ebola concerns and energy shares plunged as Brent dropped to the lowest in almost four years. The dollar slid and gold climbed.
The S&P 500 fell 1.6 percent to 1,874.82 at 4 p.m. in New York, the lowest since May and closing below its 200-day moving average for the first time since 2012. The Dow Jones Industrial Average lost 1.4 percent to a six-month low. The Bloomberg U.S. Airlines Index plunged 6.2 percent, the most in two years. Brent crude tumbled 1.5 percent after sliding into a bear market last week. The dollar weakened against most of its 16 major counterparts. Gold gained 0.7 percent.
Today’s selloff extended a rout that wiped $1.5 trillion from global equities last week amid concern about weakening economic growth. Federal Reserve Vice Chairman Stanley Fischer said during the weekend that U.S. rate increases could be delayed by slowing growth elsewhere. Confirmation that a Dallas health-care worker is infected after treating an Ebola patient who died has put a new focus on risks the virus will spread.
“There has been weakness all day and there’s no leadership so when you get this exogenous thing, whether it’s caused by Ebola or not, and airlines are getting decimated, it’s hurting everything else,” Michael Block, chief equity strategist at Rhino Trading Partners LLC, said by phone.
The S&P 500 swung between gains and losses early in the day, trading close to its 200-day moving average of about 1,905. Trading on U.S. exchanges was 44 percent above the three-month average. Selling accelerated in the final hour on reports that medical crews surrounded an Emirates Airline plane in Boston. Five passengers aboard the flight from Dubai were taken off the plane, WCVB reported.
The S&P 500 has fallen 6.8 percent from its Sept. 18 record as the Fed contemplates when to raise interest rates. The index is down 4.8 percent over three days, the most since November 2011.
The U.S. equity gauge retreated 3.1 percent last week, the most since 2012. The Russell 2000 sank 4.7 percent last week. The gauge of small-cap companies entered a correction after sliding more than 10 percent from an all-time high in March. The Dow has dropped 5.6 percent from its record last month, while the Nasdaq Composite Index has slumped 8.4 percent from a 14-year high reached in September.
The Chicago Board Options Exchange Volatility Index soared 16 percent today to 24.64, the highest level since June 2012. The measure, known as the VIX, surged 46 percent last week for the biggest rally in more than four years.
Fed officials said over the weekend that the threat from an international slowdown may lead to rate increases being delayed. The remarks highlighted mounting concern over the improving U.S. economy’s ability to withstand foreign weakness and a strengthening dollar.
Chicago Fed President Charles Evans today reiterated his concern that inflation may rise only slowly to the U.S. central bank’s 2 percent goal and said policy makers should be “exceptionally patient” in adjusting monetary policy.
The International Monetary Fund cut its forecast for global growth last week and said the euro area faces the risk of a recession. The IMF also said that the chances of equity losses in 2014 have risen and stock valuations may be “frothy.”
“Investors had seen the global growth scare as an excuse to sell the rally,” said James Butterfill, the London-based head of global equity strategy at Coutts & Co., a unit of Royal Bank of Scotland Group Plc. “This has all been a little bit overdone at this juncture. We see U.S. growth as becoming much more sustainable over the long term.”
Investors are also watching earnings reports after Alcoa Inc. unofficially kicked off the U.S. results season last week. JPMorgan Chase & Co., Citigroup Inc., BlackRock Inc. and Google Inc. are among S&P 500 members posting earnings this week. Profit for companies in the index probably rose 4.8 percent and sales gained 4.2 percent in the third quarter, analysts projected.
Gauges of energy, commodity, health-care and consumer discretionary companies lost more than 2 percent to lead declines in all 10 of the main industry groups in the S&P 500 today. United Continental Holdings Inc. and American Airlines Group Inc. tumbled more than 7 percent to pace declines among airlines.
The Stoxx Europe 600 Index was little changed, fluctuating between gains and losses throughout the day, after closing last week at the lowest level since June 2013.
Synergy Health Plc jumped 31 percent after Steris Corp., an Ohio-based maker of hospital sterilization products, agreed to buy it for about 1.2 billion pounds ($1.9 billion). Luxottica Group SpA tumbled 9.2 percent after the world’s largest eyewear company’s chief executive officer quit following a dispute about appointments to the board.
The dollar declined amid bets the Fed will keep interest rates lower for longer. The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 trading partners, dropped 0.5 percent after climbing 0.7 percent in the previous two trading sessions. The gauge hit a four-year high on Oct. 3.
The greenback declined 0.8 percent to 106.85 yen, the weakest level since Sept. 16. The dollar slid 0.9 percent to $1.2741 per euro.
The Securities Industry and Financial Markets Association recommended there be no trading in cash Treasuries today due to holidays in the U.S. and Japan.
The lead 10-year Treasury note futures traded at the CME Group Inc. rose to its highest in almost 11 months as comments from the Fed fueled speculation the central bank may push back the timing for raising interest rates. The benchmark contract expiring in December gained 14/32, or $4.38 per $1,000 face amount, to 126 31/32 at 9:08 a.m.
Traders see a 46 percent chance the Fed will raise its benchmark rate by its September 2015 meeting, fed funds futures data compiled by Bloomberg showed. That’s down from 55 percent chance as of Oct. 10.
Brent crude oil for November settlement slid 1.5 percent to $88.89 a barrel, the lowest closing price since November 2010. West Texas Intermediate crude for November delivery was at $85.74 a barrel, down 8 cents, after also tumbling into a bear market last week.
Iraq, OPEC’s second-biggest producer, will sell its Basrah Light crude to Asia at the biggest discount since January 2009, the country’s State Oil Marketing Co., known as SOMO, said yesterday. Iran last week said it will sell oil to Asia in November at the biggest discount in almost six years, matching cuts by Saudi Arabia.
Gold futures advanced as much as 1.3 percent to $1,238 an ounce, the highest price since Sept. 17, before trading at $1,230, up 0.7 percent to a three-week high. Silver gained 0.2 percent.
The MSCI Emerging Markets Index climbed 0.2 percent after touching a six-month low. The gauge last week retreated 10 percent from a Sept. 3 high.
The Hang Seng China Enterprises Index of mainland companies traded in Hong Kong declined 0.2 percent, paring earlier losses, and the Shanghai Composite Index slipped 0.4 percent even as data showed exports increased the most since February 2013 last month.
China’s exports increased 15.3 percent in September from a year earlier, exceeding the 12 percent median estimate in a Bloomberg News survey of analysts. Imports also unexpectedly climbed, rising 7 percent, against projections for a 2 percent decline, leaving a trade surplus of $31 billion.
Russian stocks rebounded from a two-month low, with the Micex index rallying 1.4 percent, as the government said it was pulling back forces from Ukraine’s borders.
The ruble weakened 0.4 percent, after a fifth week of declines. Russia’s currency interventions exceeded $4 billion last week as falling oil prices exacerbated the ruble’s longest rout in seven months.