Dow Hits 5-Month Low Amid NYSE Trading Suspension, Growth Concerns

By Saumya Vaishampayan 

        The Dow Jones Industrial Average fell to a five-month low Wednesday in a session marked by a nearly four-hour suspension of trading on the New York Stock Exchange and concerns about the pace of global growth.
        The Dow fell 261.49 points, or 1.5%, to 17515.42, ending at its lowest level since Feb. 2. The S&P 500 dropped 34.66 points, or 1.7%, to 2046.68, and the Nasdaq Composite lost 87.70, or 1.8%, to 4909.76.
        Declines were broad-based, with all S&P 500 sectors and the Dow's 30 components in negative territory.
        U.S. stocks opened sharply lower after a continued selloff in Chinese stocks spread to Chinese government bonds and other markets in Asia, heightening fears about a potential drag on global economic growth.
        Then, at 11:32 a.m. EDT, NYSE said it halted trading. The halt was in effect for nearly four hours, until 3:10 p.m. EDT. Trading on the NYSE accounts for about 15% of volume for S&P 500 stocks during the day, according to Credit Suisse.
        Roughly 7.1 billion shares traded Wednesday, higher than the 2015 average of 6.5 billion shares.
        In addition to the tumble in Chinese shares, investors continued to watch news from Greece, which faces a Sunday deadline to come up with measures that could unlock further aid.
        "Investors generally are keen to look past one source of weakness ... but all of these things combined are weighing on investor sentiment," said Jeffrey Yu, head of single stock derivatives trading at UBS AG.
        China introduced fresh measures to restore confidence Wednesday, but that didn't stop investors from dumping stocks and Chinese bonds traded offshore. The Shanghai Composite fell 5.9% to 3507.19 even as hundreds of Chinese stocks were frozen from trading. The index has tumbled 32.1% since its mid-June peak. Hong Kong's Hang Seng Index, which has been holding up better than its mainland Chinese peers, erased its gains for the year.
        The plunge in Chinese stocks is concerning for U.S. investors for a few reasons, strategists say. It has the potential to depress economic growth across the globe, which would weigh on demand for goods and services broadly. At the same time, it could weigh on earnings for U.S. companies that are closely linked to Chinese growth.
        "Industrials and materials companies in particular derive a significant share of growth from emerging markets economies broadly, including China, " said Gina Martin Adams, equity strategist at Wells Fargo Securities.
        Stocks in the U.S. have seesawed recently as investors pay attention to developments in Greece and China, leaving the Dow down 0.6% for the month. The blue-chip index has fallen 4.4% from its most recent record close.
        Investors largely brushed off the release of minutes from the Federal Reserve's June meeting, where concerns about global tumult and soft spots in the U.S. economy weighed on Fed officials.
        Ms. Adams noted that this earnings season, which kicked off this afternoon with the release of Alcoa Inc.'s second-quarter report, may be too soon to get a sense of how companies are gauging global growth.
        "What's concerning is that when we look forward, the deterioration in financial markets over the last three weeks [in China] may ultimately feed through to a much slower outlook for earnings growth over the next couple of quarters," she said. "It's too early to say, and companies aren't going to have a strong handle on that risk either," she added.
        Commodities that depend on Chinese demand, such as copper, have seen their prices tumble recently. On Wednesday, the Organization for Economic Cooperation and Development said growth is set to slow across an increasing number of the world's largest economies, including the U.S. and China.
        On Wednesday, crude-oil futures fell 1.3% to $51.65 a barrel. Gold futures added 0.9% to $1163.30 an ounce.
        But not everyone is convinced developments in China will have longer-term growth implications.
        Andrew Slimmon, a portfolio manager at Morgan Stanley Wealth Management, says he isn't surprised by the "violent correction" in Chinese stocks after such a stunning rally earlier this year. Mr. Slimmon, who only invests in developed markets, said he remains overweight Japanese stocks as he doesn't believe the Chinese selloff will weigh on global growth in the longer run.
        "I would argue that in a few months, when the calm resurfaces, we'll find out that the global growth story has not been derailed," he said.
        The yield on the 10-year Treasury note fell to 2.205% from 2.231% on Tuesday. Yields fall as prices rise.
        Fears about China overshadowed Greek news. Greece formally requested a three-year bailout from the eurozone rescue fund Wednesday and pledged to start implementing some of the reforms demanded by its creditors. European stocks rose on the news. Germany's DAX rose 0.7% and France's CAC-40 added 0.75%.
        Among individual stocks, Microsoft Corp. said it would cut up to an additional 7,800 jobs and write down by roughly $7.6 billion the value of its mobile-phone business. Shares slipped 0.1%.
        Write to Saumya Vaishampayan at saumya.vaishampayan@wsj.com
        (END) Dow Jones Newswires
        July 08, 2015 17:42 ET (21:42 GMT)

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