S&P 500 Slides to Cap Worst Three-Day Drop Since 2011

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U.S. stocks sank, erasing earlier gains and capping the worst three-day loss for the Standard & Poor’s 500 Index since 2011, as investors weighed prospects for slowing global growth and the spread of Ebola.

Halliburton Co., Dow Chemical Co. and Merck & Co. lost at least 4.3 percent to pace declines in energy, commodity and health-care companies that led the market lower. Spirit Airlines Inc., United Continental Holdings Inc. and American Airlines Group Inc. sank more than 7 percent as the Bloomberg U.S. Airlines Index extended its loss since Sept. 2 to 22 percent.

The S&P 500 slid 1.6 percent to 1,874.74 at 4 p.m. in New York, falling below its average from the past 200 days of 1,905 for the first time in two years. The index extended its three-day drop to 4.8 percent and closed at the lowest since May 20. The Dow Jones Industrial Average sank 223.03 points, or 1.3 percent, to 16,321.07. The Nasdaq Composite Index sank 1.5 percent and the Russell 2000 Index declined 0.4 percent.

“It seemed like we were finally having a little slowing in selloff momentum, but obviously the bears won out here,” Joe Bell, a senior equity analyst in Cincinnati at Schaeffer’s Investment Research Inc., said by phone. Ebola is adding to “overall uncertainty and fear amongst Americans. Energy and oil are continuing to take a beating and are leading the market lower.”

Benchmark stock indexes fluctuated between gains and losses for much of the day before extending declines in the final two hours of trading as the S&P returned below its 200-day average. Medical crews surrounded an Emirates Airline plane at Boston’s Logan Airport and five passengers aboard the flight from Dubai were taken off, WCVB reported, though there was no indication the sick travelers had Ebola.

VIX Jumps

The Chicago Board Options Exchange Volatility Index, the benchmark gauge of U.S. options prices, jumped 16 percent to 24.64, the highest level since June 2012. The so-called VIX, which gauges the cost of options to protect against further declines in equities, was down for the day before stocks extended declines in the final 90 minutes of the session.

“It looked like there were sell programs set up to sell off when the S&P looked like it was going to close below the 200-day moving average,” Randy Frederick, managing director of trading and derivatives at Charles Schwab Corp., said by phone from Austin, Texas. “My guess is that it’s probably going to be weak in the morning.”

$1.54 Trillion

The S&P 500 has lost 6.8 percent from its last record closing level on Sept. 18, its worst retreat from a high since 2012.

A rout in global equities wiped $1.54 trillion from shares last week, with the S&P 500 tumbling 3.1 percent for its worst drop in two years, amid growing concern of an international economic slowdown. 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.

Fed officials said over the weekend that the threat from overseas 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.

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.” European Central Bank President Mario Draghi said last week that there are signs the euro-area’s economic growth is slowing.

Earnings Season

Investors are also watching earnings reports after Alcoa Inc. unofficially kicked off the U.S. reporting season last week. JPMorgan Chase & Co., Citigroup Inc., BlackRock Inc. and Google Inc. are among S&P 500 members posting results 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.

“Some of the moves we saw last week in individual names were breathtaking in terms of volatility,” Walter Todd, who oversees about $1 billion as chief investment officer for Greenwood, South Carolina-based Greenwood Capital Associates LLC, said in a phone interview. “I’d definitely like to see it stabilize a little bit. The catalyst for moving higher will be earnings that aren’t necessarily good, but just not as bad as people are expecting.”

Volume Rises

About 8.7 billion shares changed hands in the U.S. today, 44 percent higher than the three-month average. 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.

QEP Resources Inc. lost 9.2 percent and LyondellBasell Industries NV, AutoNation Inc., Newfield Exploration Co. and Halliburton sank more than 7 percent for the biggest losses in the S&P 500 as 446 of its companies retreated

The Bloomberg U.S. Airlines Index slid 6.2 percent today to the lowest level since February as all 11 stocks in the gauge sank more than 2 percent. United Continental Holdings fell 7.3 percent, Spirit Airlines tumbled 9.3 percent and American Airlines Group retreated 7.2 percent.

A U.S. health worker who contracted Ebola after being in contact with an infected patient in Dallas is leading officials to examine how widespread the danger is for those who cared for him. It was the first time someone is known to have contracted Ebola inside U.S. borders, and only the second known case of an infection outside Africa.

Merck lost 4.3 percent to $56.14 for the biggest decline in the Dow. JPMorgan, which is forecast to report an 8 percent drop in adjusted third-quarter earnings per share tomorrow, declined 0.6 percent after earlier gaining more than 1 percent.

CSX Gains

CSX Corp. rallied 5.9 percent to $31.70 for its biggest gain since 2012. Canadian Pacific Railway Ltd. was rebuffed after approaching CSX with a merger proposal sometime in the past week, people familiar with the matter said. It’s not clear whether Canadian Pacific plans another overture, said the people, who asked not to be named because details are private.

Activist investor Bill Ackman, whose Pershing Square Capital Management LLP is Canadian Pacific’s second-largest shareholder, said consolidation would help the industry.

Good Technology Corp., the mobile-security startup that filed to go public in May, is postponing its initial public offering until 2015 because of worsening market conditions, according to people with knowledge of the situation. The Sunnyvale, California-based company raised $80 million in new funding last month and is waiting for the stock market to stabilize, said the people, who asked not to be identified because the decision isn’t public. The startup had filed to raise about $100 million in an IPO.