July 08, 2015
U.S. stocks ended sharply lower on Wednesday as market turmoil in China eclipsed Greece's debt crisis, while the New York Stock Exchange suffered a major outage.
Fears that a rout in Chinese stocks could seriously harm the country's economy and spread beyond its borders pushed the S&P 500 below its 200-day moving average for the first time since October and into negative territory for 2015.
The NYSE, a unit of Intercontinental Exchange Inc., resumed trade late in the session after a technical problem forced a suspension for more than three hours in the biggest outage to strike a U.S. financial market in nearly two years.
Chinese shares have fallen more than 30 percent in the last three weeks, and some investors fear China's turmoil is now a bigger risk than the crisis in Greece.
"I don't think the Greece situation is a focus in the markets beyond the short term," said Tim Ghriskey, chief investment officer of Solaris Group in Bedford Hills, New York. “This is really about China where the selloff continues unabated despite efforts by People’s Bank of China to halt this.”
Wall Street maintained its losses after the release of minutes of a June Federal Reserve policy meeting in which officials said they needed to see more signs of a strengthening U.S. economy before raising interest rates.
The Dow Jones industrial average fell 261.49 points, or 1.47 percent, to end at 17,515.42. The S&P 500 lost 34.65 points, or 1.66 percent, to 2,046.69 and the Nasdaq Composite dropped 87.70 points, or 1.75 percent, to 4,909.76.
All 10 major S&P 500 sectors were lower, with the materials index down 2.17 percent.
The NYSE trading halt came at 11:32 a.m., shortly after United Airlines was forced to ground flights at all U.S. airports due to computer issues.
The U.S. Department of Homeland Security said there were "no signs of malicious activity at this time" relating to technical difficulties that halted trading at the New York Stock Exchange and an earlier technology problem at United Airlines that had grounded flights.
"I have spoken to the CEO of United, Jeff Smisek, myself. It appears from what we know at this stage that the malfunctions at United and the stock exchange were not the result of any nefarious actor," U.S. Homeland Security Secretary Jeh Johnson said during a speech at the Center for Strategic and International Studies, a Washington think tank.
The NYSE website said all open orders were cancelled at the time of the halt. NYSE Arca and NYSE Amex/Arca options are unaffected by the issues and continued normal operations.
The Wall Street Journal's website had temporarily crashed, giving visitors a 504 error message. The full site has now been restored.
Earlier Wednesday, United Airlines grounded all flights across the United States due to a computer issue.
The NYSE also experienced technical issues at 10:37 a.m., but resolved those problems, according to its website.
Michael Ponce, senior vice president for WNJ Capital in Philadelphia said, as a bond trader, the unexpected shutdown of the New York Stock Exchange has not impacted business.
“If anything, it helps us," said Ponce, a trader for 29 years. “It just adds to all the drama from China and Greece. It’s just another thing. We bond traders love disaster.”
For the day, United Airlines' shares were down 2.74 percent at $52.82.
So far in 2015, the S&P 500 is down 0.6, while the Dow has lost 1.7 percent and the Nasdaq is up 3.7 percent.
Fears of a slowdown in China will be a concern for U.S. companies, especially materials and industrial companies, which derive a chunk of their profit from the region.
Unofficially kicking off second-quarter earnings season, Alcoa was up 0.5 percent in extended trade after its second-quarter EPS missed analyst estimates and revenue beat estimates.
U.S. corporate profits are expected to have fallen 3.1 percent in the second quarter, according to Thomson Reuters estimates data.
Even after Wednesday's selloff, stock prices appear relatively expensive: the S&P 500 is trading at about 16.6 times expected earnings, versus a 10-year historic average of 14.7 times.
Tesla Motors fell 4.82 percent to $254.96 after Pacific Crest downgraded the stock to "sector weight" from "overweight," the second rating cut in two days.
Declining issues outnumbered advancing ones on the NYSE by 2,506 to 493, for a 5.08-to-1 ratio on the downside; on the Nasdaq, 2,354 issues fell and 461 advanced for a 5.11-to-1 ratio favoring decliners.
The benchmark S&P 500 index posted 2 new 52-week highs and 25 new lows; the Nasdaq Composite recorded 24 new highs and 149 new lows.
The NYSE outage had little effect on overall trading volume. About 7.1 billion shares traded on all U.S. platforms, according to BATS exchange data, just below the average of 7.2 billion in the past five sessions.
Reuters contributed to this report.