U.S. stocks dropped, following overseas markets lower for a second day, amid concern that a slowdown in China’s economy will weigh on global growth.
The Standard & Poor’s 500 Index declined 0.8 percent to 2,067.41 at 9:32 a.m. in New York, below its average price during the past 200 days, after losing 1 percent Tuesday.
“China is a big growth driver around the world, so there’s a certain risk to global growth,” said Otto Waser, chief investment officer at R&A Research & Asset Management in Zurich. “It’s affecting sentiment across the globe and it just creates more uncertainty. If the world economy turns out to be weaker, the Fed will keep an eye on the dollar.”
The S&P 500 dropped the most in more than two weeks Tuesday as China devalued its currency, sparking worries that the world’s second-largest economy is faltering. The U.S. benchmark index had the biggest reversal since last October’s selloff, erasing three-quarters of Monday’s gain -- an advance that itself had wiped out the previous week’s decline.
Investors are watching as rallies and retreats alternate with uncommon speed in a market that has gone virtually nowhere in seven months, even as the average daily swing widened almost 20 percent from a year ago.
Earnings, Data
China’s unexpected currency move has bolstered speculation the Federal Reserve may have to delay raising interest rates. The threat of a slowdown in China could harm global growth, while lower commodity prices damp inflation. The probability of a rate increase in September slipped to 40 percent from 54 percent Monday, according to futures trading data compiled by Bloomberg.
Cisco Systems Inc. and News Corp. post quarterly results on Wednesday as the earnings season nears its end. About three-quarters of the S&P 500 companies that have reported so far beat profit estimates, while almost half topped sales projections. Analysts expect a 2.1 percent drop in second-quarter earnings, less than July 10 calls for a 6.4 percent decline.
Investors will also watch economic reports this week, including U.S. retail sales and import-price data on Thursday, and industrial production and consumer sentiment on Friday.
source:Bloomberg
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