US Stocks Slump Amid China Move as AmEx Tumbles on Earnings
New York (Apr 17) US stocks retreated the most in three weeks as American Express Co. tumbled to its lowest level since 2013, data signaled stronger inflation and China tightened trading rules.
American Express fell 4.8 percent to its lowest level since 2013 after quarterly revenue missed estimates. Travelers Cos., 3M Co. and Microsoft Corp. dropped more than 2 percent to pace declines in the Dow Jones Industrial Average. Advanced Micro Devices slumped 13 percent after saying it is hard to see whether the second half will be “substantially better” than the first half of the year.
The Standard & Poor’s 500 Index fell 1 percent to 2,083.34 at 11:52 a.m. in New York, near its average price for the past 50 days. The Dow lost 249 points, or 1.4 percent, to 17,856.77. The Nasdaq Composite Index also slid 1.4 percent.
“We’re very early in the earnings season and with multiples much higher now there’s some nervousness,” said Steve Bombardiere, an equity trader at Conifer Securities LLC in New York. “We need to get further into the season until we get some direction so right now these little things in the background are good fodder for some short-term gut wrenching.”
The S&P 500 was little changed yesterday after approaching its all-time high. While equity indexes from Asia to Europe have climbed to multiyear highs in recent days, the S&P 500 and Dow last hit theirs on March 2, the same day the Nasdaq Composite Index topped 5,000 for the first time in 15 years. The 32-day stretch without celebrating a fresh high is the S&P 500’s longest since July 2013.
Trading Range
The benchmark index has been stuck in a range of 52 points since March 20 when it last neared its record, as weaker-than-forecast data from hiring to manufacturing elevated concern about earnings while at the same time bolstered the case for keeping interest rates lower for longer.
U.S. equity futures slumped early in the day after Chinese regulators clamped down on the use of shadow financing to buy equities and expanded the supply of shares available for short sellers.
Regulators in China banned the margin trading businesses of brokerages from taking part in umbrella trusts, and said fund managers can lend shares for short selling. Investors in China have ramped up wagers on stocks by borrowing through umbrella trusts, which allow for more leverage than brokerage financing. The benchmark Shanghai Composite Index more than doubled over the past 12 months.
Chinese stock-index futures on the Hang Seng Index tumbled more than 2 percent in after-hours trading. In the U.S., the Bank of New York Mellon China ADR Index of U.S.-listed Chinese companies slid 2.9 percent, the most since December.
Economic Data
“The China news shows there was a lot of leverage in that market and there’s a lot of leverage in ours, it shows how vulnerable the market can be when that’s the case,” said Matt Maley, an equity strategist at Miller Tabak & Co. in Newton, Massachusetts.
Investors are weighing economic reports for clues on the timing of the Fed’s first rate increase since 2006. Fed Chair Janet Yellen has said that while rates will probably rise this year, any decision depends on economic data.
The cost of living in the U.S. rose in March for a third month, signaling inflation is starting to firm. A separate report showed consumer confidence improved in April to the second-highest level in more than eight years as Americans held more favorable views of the economic outlook and inflation.
Analysts predict earnings for S&P 500 companies fell 4.3 percent in the first quarter, which would be the first such period of negative profit growth since 2009, amid concern over a surging dollar and worse-than-forecast economic reports.
Tech Tumbles
All 10 of the S&P 500’s main groups fell, led by technology, consumer discretionary and financial companies. Financials in the benchmark declined 1.3 percent as American Express fell 4.8 percent to its lowest since October 2013. Travelers, Intercontinental Exchange Inc. and E*Trade Financial Corp. slumped more than 2.3 percent.
Software companies Adobe Systems Inc. and Salesforce.com Inc. lost at least 2.6 percent to help send tech shares lower. EBay Inc. retreated 2.5 percent, while Yahoo! Inc. fell 2.3 percent.
Losses of more than 2.8 percent in Gannett Co., TripAdvisor Inc. and GameStop Corp. paced declines among consumer discretionary shares. Homebuilders declined for a second day as Lennar Corp. and DR Horton Inc. dropped more than 1.7 percent. An S&P gauge of builders slid 1.9 percent for its biggest two-day slide in almost three months.
Mattel Inc. rose 4.7 percent, the most in the S&P 500, after the toy maker reported that sales declines slowed in its Barbie and Fisher-Price products and the company posted a smaller-than-estimated quarterly loss.
Schlumberger Ltd. added 0.9 percent after the world’s largest oilfield services provider said it will cut an additional 11,000 positions. That brings the total to 20,000 and will make its workforce about 15 percent smaller than it was during the third quarter of 2014.
Source: Bloomberg
