Global-growth concerns with the backdrop of the Fed’s latest meeting minutes ignited a selloff on Wall Street Thursday as U.S. stocks followed global markets lower.
The Dow Jones Industrial Average sank 358 points, or 2.06% to 169901. The S&P 500 shed 43 points, or 2.10% to 2035, while the Nasdaq Composite plunged 141 points, or 2.82% to 4877.
All ten S&P 500 sectors were in negative territory as consumer discretionary lead the way. The sector plunged 2.80% to close the session.
Currency and Treasury Bonds
In currencies, the U.S. dollar fell 0.10% against the yuan, while the euro gained 0.73% against the dollar.
The yield on the benchmark U.S. 10-year Treasury bond fell 0.035 of a percentage point to 2.094%.
Wall Street suffered steep losses amid a global market selloff as the Dow fell below the psychologically-significant 17000 mark, and the lowest level since October 30. Traders in the U.S. fretted about global growth and what a slowdown could mean for the Federal Reserve’s decision about when to begin hiking short-term interest rates.
Media and social stocks were slammed during the session as big names in the space including Disney (DIS), Time Warner (TWX), and Twitter (TWTR) came under intense selling pressure on the back of a downgrade for Disney and Time Warner to “market perform” from “outperform” from Bernstein thanks to a decline in ad revenue.
Twitter shares plunged 6%, falling to a new all-time low of $25.92, that’s below the company’s $26 IPO price.
Volume on the session was about 7% above the one-month average.
On Wednesday, minutes from the FOMC’s July policy meeting showed the central bank considered the labor market to have strengthened, but worried that inflation would run well below its 2% target as far out as through 2017. Many on the Street speculated that the minutes reflected too much hesitation and concern for the stability of the economy to go ahead with a much-talked-about September rate hike.
“An interest-rate hike in September isn’t off the table, but it is less likely now, and an uncertain macro picture will keep pressure on the U.S. market, even if interest rates stay at record lows next month,” David Madden, IG market analyst said in a note.
The Housing Market Looks Okay...For Now
On Thursday, the latest reading on the housing market showed existing single-family home sales jumped to an eight-year high in July. Sales rose 2% for the month to an annualized rate of 5.59 million units. The reading from the National Association of Realtors was higher than the increase to 5.44 million units Wall Street forecast.
The Real Worry is Global Economy
It wasn’t just domestic action that spooked U.S. investors. Focus was also overseas in China where equity markets saw another day of steep declines on the back of last week’s yuan devaluation that’s sparked a currency trickle-down effect to other nations. China's stock market is dropping fast and the People's Bank of China is trying to adjust.
“The great worry is that China will undergo a dramatic drop in the rate of growth, and the knock-on effect to Europe will damage the recovery,” Madden wrote. “The PBoC’s decision to intervene in the currency market has done little to restore confidence in the Chinese stock market, and dealers are dreading that more intervention will be required.”
China’s Shanghai Composite index dropped 3.43%, while Hong Kong’s Hang Seng officially fell into bear-market territory, dropping 20% from a recent high. The index declined 1.77% on the session, while Japan’s Nikkei shed 0.94%.
Jitters spread to European equity markets where investors there also worried about effects of China’s shaky markets, and wondered what the Fed’s move will be in September. The Euro Stoxx 50, which tracks large-cap companies in the eurozone, plunged 2.23%. The German Dax dropped 2.34%, the French CAC 40 shed 2.06%, while the UK’s FTSE 100 declined 0.56%. This Bring us to our next, never ending subject...Greece. The nation’s prime minister, Alexis Tsipras, announced Thursday he will resign from his post, and hold snap elections in September. “Greece will never settle and be fully compliant with the terms of the bailout agreement,” IG market analyst Joshua Mahony said in a note. “Greece wants to remain within the eurozone and receive creditor funding while rejecting austerity. Something has to give.”