China slowdown's latest victim: U.S. stocks
U.S. stocks tumbled on Monday as investors weighed the state of the global economy, the likelihood of central-bank action ahead and the ramifications of Glencore getting slammed, with the Swiss trading house the latest casualty of China's slowing economy.
Investors are on shaky ground as the Federal Reserve considers whether to raise benchmark interest rates before the end of the year, a move that would strengthen the U.S. dollar and put additional pressure on dollar-denominated commodity prices and foreign-sourced revenues of U.S. companies, noted Jim Russell, portfolio manager at Bahl & Gaynor.
"If they were to decrease interest rates or stay pat, it may signal the global dynamic is weaker than most investors would have hoped for," Russell told CBS MoneyWatch. "If Europe were to increase their [monetary easing] program, that would further weaken the euro and strengthen the dollar -- none of these outcomes are what we're looking for. This is a particularly tricky time, and represents a perfect storm for central banks."
The Dow Jones Industrial Average (DJI) dropped 313 points, or 1.9 percent, to 16,002, with Visa leading declines that included 29 of 30 components.
The S&P 500 (SPX) fell 50 points, or 2.6 percent, to 1,882, with health, energy and materials pacing losses among its 10 major sectors, all of which were in the red.
The Nasdaq Composite (comp) declined 143 points, or 3 percent, to 4,544.
Valeant Pharmaceuticals International (VRX) fell for a third session as Democrats on a House panel sought to force the drug maker to provide documents detailing large price hikes for two heart medications.
Shares of Glencore, whose value surged during the decade-long run-up in commodities, tumbled nearly 30 percent after analysts at Investec predicted that falling commodity prices would slam Glencore's earnings. Its shares closed at a their lowest ever.
Costco Wholesale (COST) is among U.S. corporations slated to report quarterly results this week, with the retailer slated to release its fiscal fourth-quarter results after Tuesday's close.
"It does appear earnings estimates could be too high for the third quarter, the fourth quarter and maybe 2016 as well -- we do feel global growth and domestic growth are on the sluggish side of comfortable," Russell said.