U.S. stocks tumbled, with the Dow Jones Industrial Average dropping more than 500 points, following a renewed selloff across stocks worldwide as skepticism about the strength of the global economy intensified.
Commodity shares remained at the forefront of the selloff, with energy companies sinking further into five-year lows and on pace for their worst monthly slump since 2008. Chevron Corp. slid 7.2 percent. International Business Machines Corp. fell 5.5 percent after its earnings forecast missed projections. Banks fell for a third day, with Citigroup Inc. and Bank of America Corp. down more than 5.3 percent.
The Standard & Poor’s 500 Index dropped 3.4 percent to 1,817.60 at 12:34 p.m. in New York, the most in almost five months and on track for its lowest level since April 2014. The Dow lost 521.05 points, or 3.3 percent, to 15,494.97. The Nasdaq Composite Index fell 3.4 percent and the Russell 2000 Index sank 3.5 percent.
“What the market is focused on is Chinese hard-landing fear, oil prices and the strength in the dollar,” said Phil Orlando, who helps oversee $360 billion as chief equity-market strategist at Federated Investors Inc. in New York. “We haven’t hit bottom yet. That’s when we start talking about the need to retest the summer lows and holding at that level to take us to long-term support.”
Global equities’ worst-ever start to a year is deepening as oil continues its collapse and a slowdown in China weighs on sentiment. Japanese shares joined benchmark indexes in China and Europe in tumbling into a bear market today. West Texas Intermediate crude futures slumped below $27 a barrel.
About $2.2 trillion has been wiped off the value of U.S. stocks this year through yesterday, with the S&P 500 down 8 percent. And any rallies are getting shakier: nerves are weakening in a market where everything from China to oil and the Federal Reserve are proving capable of knocking equities down at any time. It’s a reversal of the optimism that underpinned the last three years of the bull market, when traders viewed bad news as transitory and used declines as opportunities to buy the dip.
The main U.S. equity benchmark was almost 15 percent below its all-time high set in May, after rallying to within 1 percent of the record as recently as Nov. 3. The S&P 500 trades at 14.9 times the forecast earnings of its members, in line with the index’s average of the past five years. It’s more expensive than developed markets in Europe, where the Stoxx 600 Index trades for 13.6 times estimated earnings.
Investors are keeping close watch on progress in the economy to gauge the potential pace of future interest-rate increases by the Federal Reserve. The central bank’s next policy meeting concludes a week from today.
Data today showed the cost of living in the U.S. dropped in December, led by a slump in commodities that’s roiling global markets. Excluding food and fuel, the so-called core index rose less than forecast with the smallest gain in four months. A separate report showed new-home construction unexpectedly fell in December, indicating the industry lost some momentum entering 2016. Permits, a proxy for future construction, also fell on a decline in applications for multifamily projects.
Concerns about weaker growth are overshadowing the corporate earnings season, where most of the few companies that have reported so far have exceeded estimates. Verizon Communications Inc., General Electric Co. and Starbucks Corp. are among S&P companies scheduled to release financial results this week. Analysts predict profits slumped 7 percent in the final three months of 2015, while sales fell 3.1 percent.
“A few people are calling this a good buying opportunity, but nobody seems willing to really stick their neck out,” said Ross Yarrow, director of U.S. equities at Robert W. Baird & Co. in London. “All the concerns go back to China and oil. We’re already seeing a big impact in the lack of trade across the world. There isn’t much out there that can really support a lasting rally.”
The Chicago Board Options Exchange Volatility Index jumped 20 percent to 31.25, heading toward its highest level since Sept. 1. The measure of market turbulence known as the VIX has surged 71 percent so far in 2016.
All ten of the S&P 500’s main groups fell today, losing at least 1.8 percent. Energy companies dropped 4.4 percent and raw-materials tumbled 3.2 percent to lead declines. Devon Energy Corp. and Murphy Oil Corp. were among the worst performers in energy, plunging more than 11 percent. Chevron headed toward its biggest loss in four years.
The declining value in energy shares has fueled speculation on whether Energy Transfer Equity LP’s agreement to buy Williams Companies Inc. for $38 billion would follow through. The doubts dragged Williams Cos. down 7.9 percent while Energy Transfer fell 8.6 percent.
Consumer discretionary companies, one of the few industries to finish with gains Tuesday, erased the advance today, falling 3.8 percent. Eighty-four of 86 companies in the group sank, with Wynn Resorts Ltd. dropping 10 percent, and Netflix Inc. declining 7 percent. That’s a reversal from the online video company’s post-market climb yesterday after reporting fourth-quarter subscriber gains that topped estimates.
Tiffany & Co. and Amazon.com Inc. slumped more than 4.2 percent as retailers in the benchmark were on pace to reach their worst level since April. Home Depot Inc. lost 4.8 percent, falling for the fourth time in five days.
The pain was widespread among technology companies, with Facebook Inc. and Yahoo! Inc. down more than 5.5 percent, with Facebook on pace for the biggest slide in 14 months. Apple Inc. lost 2.9 percent to track toward its lowest since July 2014.