US Stocks fell extending the worst loss of two days since October for the S&P 500 Index as global shares dropped on concerns over potential political tension in Greece and growth in China.
Bank of America Corp. and Citigroup Inc. dropped around 1.9% with financial shares declining and Merck & Co., Verizon Communications Inc. and AT&T Inc leading the Dow Jones Industrial Average lower. With the rally of gold futures, Newmont Mining Corp rose 6%.
According to Bloomberg Businessweek, the S&P 500 dropped 0.9% to 2,041.79 while the Dow average fell 1.1% or 190.57 points to 17,661.91.
Steve Bombardiere, equity trader at Conifer Securities LLC said, “This seems like a knee-jerk reaction with China. We’ve had a run up, the market is certainly thinning out as we get closer to the end of the year and any move is going to be a little exaggerated.”
Global equities dropped after China said that some lower-rated bonds will no longer be used as collateral for certain short-term loans. This sparked a selloff in risky debt that spread to government stocks and notes.
USA Today quoted chief investment officer of international equities of Ariel investments, Rupal Bhansali as having said, “Debt to GDP in China has seen a massive increase as the Chinese central government has internalized on its books the problems that occurred in the private sector.”
Greece’s move to bring forward the process for choosing a new head of state risks triggering parliamentary elections that might put in power the party that opposes the nation’s bailout terms by the European Union.
Chad Morganlander, money manager at Stifel Nicolaus & Co. said, “Effectively the sell-off in Asia has led to broad-based selling across the globe. This short-term decline is thematic of the concern about global growth as well as a potential concern about Federal Reserve action next week.”
The Nikkei 225 of Tokyo dropped 0.7% while the Hang Seng Index of Hong Kong and the Shanghai Composite Index of China dropped steeply by 2.5% and 5.4% respectively.
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