The Herald Bulletin

Morning Update

Breaking News

June 24, 2013

China slump, higher bond yields weigh on markets

NEW YORK — More signs of distress in China's economy and rising bond yields led to a broad sell-off in stocks Monday, leaving key market indexes down more than 5 percent from their record highs last month.

It was the first 5 percent decline - referred to on Wall Street as a "pullback" - since November.

Pullbacks that occur during bull markets tend to be "nasty and brutish" — but short, said John Manley, chief equity strategist at Wells Fargo Funds Management. He said it's common to get declines of 3 percent to 7 percent "as the market restores a reverence to risk to the investing public."

U.S. trading started with a slump Monday. The market recovered much of its loss, then fell back again. By the close of trading the big stock indexes were clinging to modest gains for the second quarter, which ends Friday.

Before Wall Street opened for trading on Monday, Asian markets were already sharply lower, led by a 5 percent plunge in China's Shanghai Composite Index. That was the index's biggest loss in four years. The decline was prompted by a government crackdown on off-balance sheet lending, which made investors worry about China's economic growth. The selling spread to Europe, where France's benchmark stock index fell 1.7 percent, Germany's 1.2 percent.

U.S. traders took one look at that and started dumping stocks. The Dow Jones industrial average fell as much as 248 points in the first hour of trading. The yield on the 10-year Treasury note spiked to its highest in almost two years as the sell-off brought down prices of U.S. government debt. Gold and other metals also fell.

Stocks got closer to break-even around midday before falling again in the last hour. The Dow finished down 139.84 points, or 0.9 percent, at 14,659.56. The S&P 500 index fell 19.34 points, or 1.2 percent, to 1,573.09. The Nasdaq dropped 36.49 points, or 1.1 percent, to 3,320.76.

All 10 industry groups in the S&P 500 fell. The biggest drop was 1.8 percent for bank and financial stocks. Bank of America fell the most among major bank stocks, giving up 39 cents, or 3.1 percent, to $12.30.

The S&P 500 is down 5.7 percent from its all-time of 1,669 on May 21. The Nasdaq has fallen 5.2 from its own recent high on that day.

Markets remain vulnerable to any comments from the Federal Reserve about its $85 billion in monthly bond purchases, which have kept interest rates at historic lows and helped drive the stock market's rally the last four years. On Wednesday and Thursday, the S&P plunged 3.9 percent after the central bank said its bond-buying program could wrap up by the middle of next year as long as economic conditions continue to improve. Stocks edged up Friday, but still had their worst week in two months.

"I think investors are overreacting to the prospects of a change in Fed policy," Thayer said. He noted that unemployment is down, inflation is low. "These are good economic conditions."

Gold fell $14.90, or 1.2 percent, to $1,277.10. Other metals were down, too. Crude oil rose $1.49, or 1.6 percent, to $95.18 per barrel.

Since starting its bull run in March 2009, the S&P 500 has had seven pullbacks of between 5 and 9 percent and two corrections, decline of 10 percent to 19.9 percent. So far, the market has come back stronger from each setback. The S&P is still up 133 percent during this four-year bull market.

"Pullbacks are a natural occurrence in markets," said Janet Engels, senior vice president and director of the private client research group at RBC Wealth Management. "We likely have further to go."

The last time the U.S. stock market had a full-blown correction — defined as a drop of at least 10 percent from a peak — was July 22-Oct. 3, 2011, when the S&P 500 fell 18.3 percent. That fall was caused by concern that a fight between U.S. lawmakers over extending the debt ceiling would push the U.S. into default.

The yield on the 10-year note was unchanged from late Friday at 2.54 percent. Earlier in the day it was at 2.67, its highest level in almost two years. The yield has surged from its 2013 low of 1.63 percent on May 3. The increase accelerated last week after the Fed laid out the possible timetable for curtailing its bond-buying program. Yields rise when demand for bonds weakens.

The Fed's easy-money policies have kept bond yields and other interest rates artificially low since the financial crisis of 2008, making borrowing cheaper. The 10-year yield is used as a benchmark for many kinds of loans to individuals and businesses, including home mortgages.

The last time the yield was above 3 percent was late July, 2011. The last time it was consistently above 4 percent was July 2008, two months before the peak of the financial crisis.

Other stocks with big moves included:

— PulteGroup slumped 50 cents, or 2.7 percent, to $18.31. Investors have worried that higher U.S. interest rates will hurt homebuilding companies by making mortgages more expensive.

— Tenet Healthcare rose $1.88, or 4.5 percent, to $43.73 after offering to buy Vanguard Health Systems Inc. for $1.8 billion. The offer of $21 per share pushed Vanguard stock up $8.33, or 67 percent, to $20.70.

— Facebook fell 60 cents, or 2.4 percent, to $23.93. Monday was the first full trading day after Facebook acknowledged it had accidentally exposed contact information for 6 million users to some other users.

— Apple fell $10.96, or 2.7 percent, to $402.50 after an analyst said the company appears to have cut back iPhone production. The company didn't have any immediate comment.

 

1
Text Only
Breaking News
  • FEA - HB0121 - flu - 05 Second wave of milder flu hitting Northeast

    Months ago, the flu season seemed to be winding down. But health officials on Friday reported widespread flu-like illnesses in six states.

    April 18, 2014 1 Photo

  • NWS - HB0525 - marijuana - JM -pic (4).jpg Colorado deaths stoke worries about pot edibles

    A college student eats more than the recommended dose of a marijuana-laced cookie and jumps to his death from a hotel balcony. A husband with no history of violence is accused of shooting his wife in the head, possibly after eating pot-infused candy.

    April 18, 2014 1 Photo

  • news_skoreaferry.jpg Ferry captain arrested in South Korea disaster

    A prosecutor says the captain of the South Korean ferry that sank two days ago has been arrested.

    April 18, 2014 1 Photo

  • Clinton visit.jpg Documents: Clinton sought GOP support for health care

    Thousands of pages of documents from President Bill Clinton's White House affirm a longtime adage: The more things change, the more they stay the same.

    April 18, 2014 1 Photo

  • Student struggles to recount fatal truck-bus crash

    Most of the 911 calls from witnesses to last week's fiery truck-bus collision that killed 10 were matter of fact. Then there was the one from a passenger: With shrieks in the background, the student struggled to recount how a truck came roaring toward them.

    April 18, 2014

  • Magnitude-7.5 earthquake shakes Mexican capital

     A powerful, magnitude-7.5 earthquake shook central and southern Mexico on Friday. The U.S. Geological Survey said it was centered northwest of the Pacific resort of Acapulco, where many Mexicans are vacationing for the Easter holiday.

    April 18, 2014

  • Doomed ferry's sharp turn, slow evacuation probed

    The investigation into South Korea's ferry disaster focused on the sharp turn it took just before it began listing and on the possibility that a quicker evacuation order by the captain could have saved lives, officials said Friday, as rescuers struggled to find some 270 people still missing and feared dead.

    April 18, 2014

  • Avalanche sweeps down Everest, killing at least 12

    An avalanche swept down a climbing route on Mount Everest early Friday, killing at least 12 Nepalese guides and leaving three missing in the deadliest disaster on the world's highest peak.

    April 18, 2014

  • news_horselesscarriage.jpg Proposed car to replace NYC horse carriages shown

    An electric car that proponents hope will replace horse-drawn carriages in New York City was presented Thursday at the New York International Auto Show, as critics expressed their distaste for the idea.

    April 18, 2014 1 Photo

  • news_southwest.jpg Flight lands safely in Indiana after threat

    An Indianapolis airport spokesman said a Southwest Airlines flight safely made an emergency landing after the airline received some kind of threat.

    April 18, 2014 1 Photo

Featured Ads
More Resources from The Herald Bulletin
AP Video
Captain of Sunken SKorean Ferry Arrested Raw: Fire Destroys 3 N.J. Beachfront Homes Raw: Pope Presides Over Good Friday Mass Raw: Space X Launches to Space Station Superheroes Descend on Capitol Mall Man Charged in Kansas City Highway Shootings Obama Awards Navy Football Trophy Anti-semitic Leaflets Posted in Eastern Ukraine Raw: Magnitude-7.2 Earthquake Shakes Mexico City Ceremony at MIT Remembers One of Boston's Finest Raw: Students Hurt in Colo. School Bus Crash Raw: Church Tries for Record With Chalk Jesus Raw: Faithful Celebrate Good Friday Worldwide Deadly Avalanche Sweeps Slopes of Mount Everest Police Arrest Suspect in Highway Shootings Drought Concerns May Hurt Lake Tourism Vermont Goat Meat Gives Refugees Taste of Home Calif. Investigators Re-construct Fatal Bus Cras Mayor Rob Ford Launches Re-election Campaign Appellate Court Hears Okla. Gay Marriage Case
Parade
Magazine

Click HERE to read all your Parade favorites including Hollywood Wire, Celebrity interviews and photo galleries, Food recipes and cooking tips, Games and lots more.
Hyperlocal Search
Premier Guide
Find a business

Walking Fingers
Maps, Menus, Store hours, Coupons, and more...
Premier Guide
Helium debate
Helium
Front page
Poll

What do you think of Anderson's decision to have an Independence Day parade and other festivities on July 3?

That's great!
Should be OK
What a waste of money!
     View Results