U.S. Stocks Retreat Amid Global Slump in Auto, Commodity Shares

by **Cals** Tue 22 Sep 2015, 23:33

[size=49]U.S. Stocks Retreat Amid Global Slump in Auto, Commodity Shares[/size]
Roxana Zega Dani Burger
September 22, 2015 — 3:44 PM MYTUpdated on September 22, 2015 — 10:41 PM MYT

U.S. stocks fell, with raw-material shares dragged lower as commodities retreated, a selloff in biotechnology shares deepened and Volkswagen AG’s diesel-emissionscheating scandal continued to rattle global auto stocks.

Fiat Chrysler Automobiles NV fell 5.8 percent, while Ford Motor Co. and General Motors Co. lost at least 2.8 percent. Freeport-McMoRan Inc. and Alcoa Inc. dropped more than 4.5 percent amid sliding commodity prices. The Nasdaq Biotechnology Index sank 2.3 percent after losing 4.4 percent Monday. Apple Inc., Microsoft Corp. and Facebook Inc. declined at least 1.3 percent.

The Standard & Poor’s 500 Index lost 1.6 percent to 1,936.30 at 10:38 a.m. in New York, after rising 0.5 percent yesterday. The Dow Jones Industrial Average slid 256.85 points, or 1.6 percent, to 16,253.85. The Nasdaq Composite Index slumped 1.8 percent. A gauge of volatility was headed for its biggest gain in a month.

“With macro uncertainty and very little fundamentals overall, when you see a rise in volatility it leads to investor uncertainty and any bad news has the opportunity to shake things up,” said Joseph Betlej, who helps oversee $33 billion as vice president of Advantus Capital Management. “It’s a hangover from last week’s Fed move. Yesterday was just a little bounce.”

Equities got a boost Monday after a quartet of Fed officials talked up prospects for higher rates in 2015, just days after the central bank jolted investors by citing global market turmoil and a slowdown in China as reasons for standing pat. Their remarks suggested continued improvement in the domestic economy may overshadow concerns about global conditions.

The central bank’s bid for greater transparency about its criteria for a rate increase has left markets twitching with every economic report amid an expanding Fed checklist and conflicting U.S. data. Fed Chair Yellen said last week that policy makers would scrutinize slowing growth in China and emerging markets for risks that could spill over to the U.S.

Meanwhile, the market remains unconvinced a liftoff will take place this year after the Fed’s decision and its dovish statement. Traders are pricing in a 46 percent probability of a rate increase by the Federal Open Market Committee’s December meeting, compared with 64 percent on Sept. 16 before the policy decision.

Equities have been particularly volatile amid concerns about the impact of China’s slowdown on global growth and the Fed’s intentions. The Chicago Board Options Exchange Volatility Index has closed above 20 for 21 straight sessions, the longest stretch since June 2012. The measure of market turbulence known as the VIX jumped 16 percent Tuesday to 23.35.

Several technical charts are also sounding warning signals that the worst of equities turmoil may not be over. A downward sloping neckline in a head-and-shoulders pattern have formed in the Dow industrial average. The index and the Dow Jones Transportation Average also breached the low from last October, flashing a so-called Dow Theory sell signal.

“People may think that the Fed knows things that the people don’t know, but this is really lack of visibility right now,” said Christian Gattiker, head of research at Julius Baer Group in Zurich. “The whole situation is rather fragile -- at least that’s the perception. In hindsight, it would have been a better sign from them to hike rates and calm the markets saying, ‘That was it.’ People are trying to make sense of it, and we’re zig-zagging.”

All of the S&P 500’s 10 main groups declined Tuesday, with raw-materials and technology companies falling more than 1.8 percent. Nine of the 10 industries lost at least 1.1 percent.

Mosaic Co. fell 6.6 percent to its lowest level since January 2009. The largest U.S. producer of potash fertilizer said it plans to reduce output as low crop prices continue to erode farmer demand for agricultural products. Monsanto Co. and Dow Chemical Co. slid at least 1.6 percent to pace declines in raw materials. Newmont Mining Co. lost 5.2 percent as gold prices fell.

Semiconductors led the retreat among technology shares, falling for a fourth straight session, the longest losing streak in a month. Applied Materials Inc., Micron Technology Inc. and Nvidia Corp. slumped more than 2.4 percent, while Intel Corp. fell 1.7 percent.

Biotech shares extended declines sparked yesterday after Democratic presidential candidate Hillary Clinton criticized high drug prices. Today she said she’d implement programs to force the industry to concede tens of billions of dollars a year in tax breaks, lower prices and increase research spending. Celgene Corp., Mylan NV and Biogen Inc. led declines in the Nasdaq Biotech Index, falling more than 1.4 percent.