Weakness in Chinese markets and continuing uncertainty about the Greek debt crisis dragged benchmarks lower on Wednesday. Additionally, trading was halted in the New York Stock Exchange for nearly three-and-a-half hours due to a technical glitch. While the Dow closed at its lowest level since February, the S&P 500 ended at its lowest level since March.
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The Dow Jones Industrial Average (DJI) declined 1.5% to close at 17,515.42. The Standard & Poor’s 500 (S&P 500) decreased 1.7% to 2,046.68. The tech-laden Nasdaq Composite Index closed at 4,909.76; decreasing 1.8%. The fear-gauge CBOE Volatility Index (VIX) surged 22.2% to settle at 19.66. A total of about 7.1 billion shares were traded on Wednesday, lower than this month’s average of 7.2 billion. Decliners outpaced advancing stocks on the NYSE. For 81% stocks that declined, 17% advanced.
Benchmarks ended sharply lower on Wednesday after a selloff in Chinese stocks raised concerns about global economic growth. The benchmark Shanghai Composite Index finished 5.9% lower on Wednesday. The index has tanked 32.1% since its peak in mid-June. The yuan declined to a four-month low in offshore markets. Mutual fund houses also sold debt to raise cash resulting in decline in Chinese government bonds.
Chinese government agencies stepped up their efforts to curb the selloff. The China Securities Regulatory Commission said that China Securities Finance Corp. will buy more small-cap stocks to stabilize the market. The People’s Bank of China also assured to help the state-backed company to have enough liquidity to stabilize the market. On Wednesday, they restricted hundreds of Chinese stocks from trading.
Investors were also concerned about the Greek debt crisis. Greece has formally requested its lenders for a three-year bailout from Eurozone’s rescue fund. Greek Prime Minister Alexis Tsipras promised to deliver “concrete proposals” to its creditors in the next few days. Greece’s lenders had already set the country a Sunday deadline to come up with new aid proposals. Greece faces the threat of exiting the currency bloc if it fails to introduce a new set of economic measures within the stipulated time frame. Greece’s banks and stock exchanges remained closed on Wednesday.
Unlike news from China and Greece, investors’ reaction to the Federal Reserve minutes was muted. Minutes from the Federal Open Market Committee’s meeting on June stated that “many participants” needed further evidence that the “economic growth was sufficiently strong and labor-market conditions had firmed enough to return inflation to the committee's longer-run objective over the medium term” in order to hike rates this year. Only one member, however, showed willingness to “take that step at this meeting but also expressed a willingness to wait another meeting or two”.
Meanwhile, a three-and-a-half hours suspension of trading in New York Stock Exchange (NYSE) also affected trading. Trading in NYSE was halted from 11:32 a.m. EDT to 3:10 p.m. EDT due to a technical glitch.
Wednesday’s losses were broad based with all 10 sectors of the S&P 500 ending in the red. The Materials Select Sector SPDR ETF (XLB) dropped 2.2%, the highest among the S&P 500 sectors. Key stocks from the sector including E. I. du Pont de Nemours and Company (DD), Monsanto Company (MON), The Dow Chemical Company (DOW), Praxair Inc. (PX) and LyondellBasell Industries N.V. (LYB) decreased 1.6%, 1.7%, 2.6%, 2% and 2.6%, respectively.
The Energy Select Sector SPDR (XLE) declined 2% and was the second biggest loser among the S&P 500 sectors. Dow components Exxon Mobil Corporation (XOM) and Chevron Corporation (CVX) dropped 1.1% and 1.8%, respectively. Other key stocks from the energy sector including Schlumberger Limited (SLB), ConocoPhillips (COP) and Transocean Ltd (RIG) decreased 1.5%, 2.2% and 3.7%, respectively. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report DU PONT (EI) DE (DD): Free Stock Analysis Report MONSANTO CO-NEW (MON): Free Stock Analysis Report DOW CHEMICAL (DOW): Free Stock Analysis Report PRAXAIR INC (PX): Free Stock Analysis Report LYONDELLBASEL-A (LYB): Free Stock Analysis Report EXXON MOBIL CRP (XOM): Free Stock Analysis Report CHEVRON CORP (CVX): Free Stock Analysis Report SCHLUMBERGER LT (SLB): Free Stock Analysis Report CONOCOPHILLIPS (COP): Free Stock Analysis Report TRANSOCEAN LTD (RIG): Free Stock Analysis Report To read this article on Zacks.com click here.
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