BY TANYA AGRAWAL
THE LEVANT NEWS – U.S. stocks slumped at the open on Wednesday, pushing the bluechip Dow Jones Industrial average into negative territory for the year, as Chinese markets slid further and as the Greece debt crisis dragged on.
The decline also pushed the Nasdaq Composite index to its lowest level in two months and the S&P 500 index to its lowest level in over four months.
Beijing unveiled yet another battery of measures to arrest the sell-off in shares and the securities regulator warned of “panic sentiment” gripping investors in the world’s second-largest economy.
More than 30 percent has been knocked off the value of Chinese shares since mid-June, and for some global investors the fear that China’s market turmoil will destabilize the real economy is now a bigger risk than the crisis in Greece.
“It’s important for investors to separate the stock market volatility and economic slowdown in China,” said Art Hogan, chief market strategist at Wunderlich Securities in New York.
“Yes, the stock market is very volatile and is causing uncertainty, but you have to remember that only about 15 percent of China’s population invests in the stock market.”
The growing fears of a China slowdown were reflected in the commodities markets, with copper prices falling to a six-year low earlier in the day. Oil prices, however, bounced back from a three-month low as the Iran nuclear talks failed to produce a deal.
At 9:42 a.m. ET the Dow Jones industrial average .DJI was down 156.73 points, or 0.88 percent, at 17,620.18. The S&P 500 .SPX was down 16.55 points, or 0.8 percent, at 2,064.79 and the Nasdaq Composite .IXIC was down 43.67 points, or 0.87 percent, at 4,953.79.
All the 10 major S&P 500 sectors were lower, with the telecommunications index’s .SPLRCL 1.7 percent fall leading the declines.
U.S.-listed shares of Chinese companies took a beating, with Alibaba (BABA.N) falling 1.7 percent. Baidu (BIDU.O) fell 2.4 percent, Weibo (WB.O) 3.3 percent and Cheetah Mobile (CMCM.N) 9.5 percent.
Beijing authorities could “let the unwind run its natural course and deal with the fallout, or manipulate the market,” said Nick Lawson, a managing director at Deutsche Bank in London. “But (they) run the risk that this will entail so many impediments to free trade that index providers and foreign investors will be discouraged from entering the market for a long time.”
Euro zone members have asked Greece to come up with new reform proposals, which will be discussed at a special EU summit on Sunday.
With its banks closed, cash withdrawals rationed and the economy in free fall, Greece has never been closer to a total state bankruptcy that would probably force it to leave the euro.
Investors will also scrutinize the minutes from the U.S. Federal Reserve’s June 16-17 meeting to see if the storm clouds over Greece and China could have an effect on the timing and pace of an interest rate hike. The minutes are due at 2:00 p.m. ET.
San Francisco Fed President John Williams is scheduled to speak on the economic outlook before the International Conference of Commercial Bank Economists later in the day.
The U.S. quarterly earnings season kicks off, with Alcoa (AA.N) reporting results after the close of markets. Corporate profits are expected to have fallen 3.1 percent in the second quarter, according to Thomson Reuters data.
Microsoft (MSFT.O) shares fell 0.77 percent to $44.63 after the company announced a new round of layoffs to cut costs further.
Harley-Davidson (HOG.N) fell 2.05 percent to $55.50 after RBC downgraded the stock to “sector perform” from “outperform”.
Tesla Motors (TSLA.O) fell 4 percent to $257.43 after Pacific Crest downgraded the stock to “sector weight” from “overweight” on valuation, the second rating cut in two days.
Declining issues outnumbered advancers on the NYSE by 2,120 to 587. On the Nasdaq, 1,836 issues fell and 500 advanced.
The S&P 500 index showed one new 52-week highs and one new lows, while the Nasdaq recorded 12 new highs and 27 new lows.