U.S. stocks declined, with the Standard & Poor’s 500 Index posting its worst month in more than three years, as investors harbored concerns about slowing global growth and the impact of a potential interest-rate increase by the Federal Reserve as soon as September.
Merck & Co. and Celgene Corp. sank at least 2.7 percent to weigh on the health-care group. Yahoo! Inc. and Facebook Inc. slumped more than 1.7 percent to drag technology shares lower. Energy erased an earlier drop along with oil, as Consol Energy Inc. and ConocoPhillips gained more than 4.9 percent. Phillips 66 rose 2.4 percent as Warren Buffett’s Berkshire Hathaway Inc. has amassed a $4.5 billion stake in the oil refiner. Berkshire fell 1.3 percent.
The S&P 500 lost 0.8 percent to 1,972.18 at 4 p.m. in New York, capping its biggest monthly slide since May 2012. The gauge in earlier trading fell as much as 1.2 percent. The Dow Jones Industrial Average sank 114.98 points, or 0.7 percent, to 16,528.03, completing its worst monthly drop since May 2010. The Nasdaq Composite Index declined 1.1 percent to also finish its steepest retreat since May 2012. About 7.8 billion shares traded hands on U.S. exchanges, 11 percent above the three-month average.
“There’s so much emotion right now, and in this environment you can come in any morning and have something out of Europe or Asia crossing us and that’s what causes us to move,” said Steve Bombardiere, an equity trader at Conifer Securities LLC in New York. “There were a lot of people who wanted to buy a correction, but after last week they paused and are thinking about how long it is going to last.”
Equities trimmed their losses in the late morning after energy shares in the benchmark index reversed a 2.5 percent selloff to rally as much as 1.4 percent. The move followed a jump in oil prices after a government report reduced its crude production estimates and OPEC said it’s ready to talk to other global producers to achieve “fair prices.” Stocks have been whipsawed by gains and losses since last week as markets remain subject to sudden shifts in investor sentiment.
The S&P 500 ended down 6.3 percent this month as China’s currency devaluation on Aug. 11 spurred concern over global growth, erasing more than $5.3 trillion in equity market values worldwide. The benchmark’s 0.9 percent gain last week masked a volatile period in which the S&P 500 plunged the most since 2011 to enter a correction, only to rally more than 6 percent over two days for its best back-to-back gains since the beginning of the bull market in 2009.
The Chicago Board Options Exchange Volatility Index rose 9.1 percent Monday to 28.43. The measure of market turbulence known as the VIX had a record monthly jump, up 135 percent. More than $2 trillion of share value was erased from U.S. markets between the end of July and the lowest levels of last week, a sum equal to roughly two years of S&P 500 earnings, data compiled by Bloomberg show.
The S&P 500 had its worst August since 2001, while the Dow’s 6.6 percent drop was its biggest since it fell 15 percent in August 1998.
While August ranks in the middle among months based on share performance, it has produced some of the worst returns of the year since 2009. During the week ended August 12, 2011, the S&P 500 alternated between gains and losses of at least 4 percent for four days, something never seen in 88 years of data compiled by Bloomberg. In 2013, the S&P 500 fell 3.1 percent in August, one of only two months of negative returns in a year when the index surged 30 percent.
Despite this month’s equities rout, remarks by Federal Reserve Vice Chairman Stanley Fischer suggested the central bank hasn’t ruled out raising interest rates when the Federal Open Market Committee gathers on Sept. 16-17. Bets on a September liftoff climbed after Fischer said there is “good reason” to believe inflation will accelerate. Traders are now pricing in a 40 percent chance the central bank will act in September, up from a one-in-four chance last Wednesday.
The Fed has said it will be appropriate to raise rates when it has seen some further improvement in the labor market and is “reasonably confident” inflation will move back to its 2 percent target over the medium term. Investor attention will focus this week on the government’s August jobs report, due Friday, as the last major data point before the Fed’s meeting.
“August was a rough month for everybody,” said Michael Block, chief equity strategist at Rhino Trading Partners LLC in New York. “There’s a little scare now where people are getting this feeling from Fischer saying we could see a hike as soon as September, that they don’t care about volatility and that we’re on our own. You could argue a rate hike is good for stocks, but it’s a big unknown and the market is undecided, that’s where the fear is.”
Nine of the S&P 500’s 10 main groups fell Monday, with utilities, health-care and industrial shares sliding the most. Energy companies were up 1.1 percent as crude oil surged 8.8 percent.
The health-care group was August’s worst performer in the benchmark index, down 8.1 percent, the steepest monthly decline since February 2009. Amgen Inc. slid 2.6 percent today and had its weakest month in more than seven years. The Nasdaq Biotechnology Index sank 3.1 percent, its largest monthly loss since March 2014.
Kroger Co. fell 1.7 percent to pace a drop among consumer staples companies. The supermarket chain extended its August decline to 12 percent, the most in a month since January 2009. Drug-store chain CVS Health Corp. retreated 1.7 and lost 9 percent in August, its biggest monthly slide in five years.
Boeing Co. and Textron Inc. declined at least 1.9 percent to lead industrial companies lower. General Electric Co. and United Technologies Corp. lost more than 1.3 percent. GE had its worst month since January, falling 4.9 percent.
Netflix Inc. slipped 2.2 percent. The online streaming service said it won’t renew its contract with cable network Epix, preferring to develop original movies rather than stick with films it had to share with other providers.
Consol Energy rose 5.8 percent amid crude’s biggest three- day gain since 1990, leading energy companies higher. Hess Corp., Marathon Oil Corp. and Chesapeake Energy Corp. each gained at least 3.4 percent. The group pared its monthly decline to 4.7 percent after losing 7.8 percent in July and sliding for the fourth straight month.
© Copyright 2022 Bloomberg News. All rights reserved.