Dow Index briefly falls 150 points on China, commodity slide
New York (July 27) US stocks traded lower on Monday as the continued decline in commodities and an overnight plunge in Shanghai stocks pressured sentiment amid a lackluster earnings season. ( Tweet This )
"The fear factor of China is very much alive in the market. That's nearing us to some technical support levels," said Peter Cardillo, chief market economist at Rockwell Global Capital. "Slow growth out of China just complicates the oil picture."
Stocks struggled to remain above session lows. The S&P 500 briefly dipped below its 200-day moving average of 2,064.14 and attempted to hold above it. The energy sector was one of the worst performers in the S&P 500 as oil extended losses to trade below $48 a barrel.
The Dow Jones industrial average traded about 130 points lower after falling more than 150 points in the open to a multi-month low. The Nasdaq Composite briefly declined more than 1 percent.
"I think it's taking money off the table, waiting to see what happens in China—some clarity," said Phil Quartuccio, CEO of Illustro Trading. He also noted lighter trade volume due to the summer holidays.
Mainland Chinese stocks extended Friday's losses, with the Shanghai Composite dropping nearly 8.5 percent for its largest one-day loss since 2007. The Hang Seng closed about 3 percent lower.
The China Securities Regulatory Commission said late Monday night that the local government will increase purchases of stocks in an effort to keep the equity market up.
Stocks around the world closed lower on Friday as weak PMI data in China and the euro zone increased global growth concerns.
"Coming into the market you got this great sense that we can't avoid what's happening in the global-macro," said Art Hogan, chief market strategist at Wunderlich Securities. "We just went through a week (in which) 75 percent of S&P companies beat estimates and you would never realize that by the way the market (reacted). You got a week characterized by lackluster revenue growth."
Adding to concerns about growth, the number of new lows on the New York Stock Exchange hit the highest level since last October.
"It's a concern," said Marc Chaikin, CEO of Chaikin Analytics. "I think this is a one time when the technicals really have to be your guide. The internals—breadth numbers—are not good."
Still, he said that "until we break that 2,040 level on the downside, I think everything is going to signal the bull market is still intact."
European stocks closed lower, with the DAX off about 2.5 percent Monday. U.S. stock index futures gave up early gains to trade lower, with Dow Jones industrial average futures down more than 100 points.
"China's already happened so there's nothing more to happen out of China today," said James Meyer, chief investment officer at Tower Bridge Advisors. "What you're going to watch today is commodities and earnings. It's the biggest week in S&P earnings this week."
The Chinese search engine Baidu posts results after the close. Several Internet giants reporting results over the next few days include Twitter on Tuesday, Facebook on Wednesday and LinkedIn on Thursday.
The Thomson Reuters CRB commodities index on Monday hit its lowest level in six years, while U.S. oil prices remained below $50 a barrel. However, gold prices gained to hold above 5-1/2 year lows.
Crude oil futures settled down 75 cents at $47.39 a barrel, the lowest level since March 20. Gold futures ended up $10.90 at $1,096.40 an ounce.
The U.S. dollar fell nearly 1 percent against major world currencies, with the euro creeping above $1.11 and the yen at 123.2 yen against the greenback.
Treasury yields held lower, with the 10-year yield at 2.23 percent and the 2-year yield at 0.65 percent.
Meanwhile, June durable goods data showed an increase of 3.4 percent, beating expectations slightly. No other major economic data is due.
The Federal Reserve begins a two-day meeting on Tuesday.
In corporate news, Israel's Teva Pharmaceutical said it will buy Allergan's generic pharmaceuticals business for $40.5 billion.
U.S. regulators fined Fiat Chrysler a record $105 million for lapses in safety recalls.
The Dow Jones Industrial Average traded down 130 points, or 0.73 percent, at 17,439, with Boeing leading decliners and Intel the greatest advancer.
The S&P 500 traded down 10 points, or 0.50 percent, at 2,069, with energy leading eight sectors lower and utilities and telecommunications the only advancers.
The Nasdaq traded down 43 points, or 0.86 percent, at 5,044.
The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, approached 16.
About 11 stocks declined for every four advancers on the New York Stock Exchange, with an exchange volume of 527 million and a composite volume of 2.6 billion in afternoon trade.