Date
19 January 2017
Concerns about China's economic slowdown and the impact of a potential US interest rate hike sent global equity prices sharply lower in August. Photo: Bloomberg
Concerns about China's economic slowdown and the impact of a potential US interest rate hike sent global equity prices sharply lower in August. Photo: Bloomberg

US stocks post worst monthly drop in more than 3 years

US stocks slumped on Monday, rounding off a volatile month of trading, as investors fretted about slowing global growth and a potential interest-rate hike by the Federal Reserve in September.

The S&P 500 Index slid 0.8 percent to 1,972.18 points, recording a 6.3 percent drop for August — its worst monthly performance since May 2012.

The Dow Jones Industrial Average fell 114.98 points to 16,528.03, ending with a 6.6 percent loss for the month. It marked the biggest monthly slide for the index since May 2010.

Surging oil prices lifted energy stocks, but markets were weighed down overall by concerns about China’s economic slowdown and expected policy tightening by the US central bank.

Over the weekend, Fed Vice Chairman Stanley Fischer said in a speech that US inflation is likely to rebound, allowing interests rates to rise gradually.

Many analysts took Fischer’s comments, which were made at a central bankers’ conference in Jackson Hole, Wyoming, as a sign the central bank will raise rates in September, instead of December, Reuters reported.

That added to nervousness in the market, where investors were already on edge due to concerns about China.  

“If they move in September, it’s going to cast a lot of doubt about where they will stop,” Stephen Massocca, chief investment officer at Wedbush Equity Management in San Francisco, told Reuters.

Monday’s slide in US equities came in the wake of declines in markets in Europe and Asia. The Shanghai Composite tumbled 12.5 in August.

“There’s so much emotion right now, and in this environment you can come in any morning and have something out of Europe or Asia crossing us and that’s what causes us to move,” Steve Bombardiere, an equity trader at Conifer Securities in New York, told Bloomberg News.

“There were a lot of people who wanted to buy a correction, but after last week they paused and are thinking about how long it is going to last.”

China’s currency devaluation on Aug. 11 spurred concern over global growth, erasing more than US$5.3 trillion in equity market values worldwide.

“August was a rough month for everybody,” Michael Block, chief equity strategist at Rhino Trading Partners in New York, told Bloomberg.

“There’s a little scare now where people are getting this feeling from Fischer saying we could see a hike as soon as September… You could argue a rate hike is good for stocks, but it’s a big unknown and the market is undecided, that’s where the fear is.”

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