News: Dow Jones
08/20/15 02:45 PM EDT
By Dan Strumpf
Growth worries rattled stock markets from China to Germany and the U.S., with the Dow industrials on course for their lowest finish of the year.
The latest catalyst to pull shares lower was the Federal Reserve, which on Wednesday released July meeting minutes showing that some central-bank officials harbored doubts about the health of the global economy. That further spooked investors who were already unnerved by the economic and financial turmoil in China and a renewed plunge in crude-oil prices.
The Dow Jones Industrial Average fell 243 points, or 1.4%, to 17106, sending the blue chips on pace to close at their lowest level since mid-December.
"People are worried about the Fed," said Rick Fier, director of execution services at Conifer Securities. "People want the Fed raising rates [in response to] the economy getting better."
Wednesday's Fed minutes showed officials are divided on when to raise interest rates, seen as a possibility as soon as September. Some Fed officials pointed to slowing growth in China's once-booming economy as a reason for caution.
The losses in the U.S. come on the heels of declines in Asia and Europe. The Shanghai Composite dropped 3.4% and stocks in Hong Kong and Taiwan fell into bear-market territory. France's CAC-40 declined 2.1% and Germany's DAX lost 2.3%.
Ultralow interest rates have helped spur a rally in stocks since the financial crisis, which has prompted investors to monitor closely the Fed's timeline for rate increases. At the same time, if the Fed decides to delay raising interest rates on growth concerns, that could weigh on the outlook for corporate profits and stock gains.
The S&P 500 lost 1.3% and the Nasdaq Composite fell 2%. Higher-growth corners of the market that have run up this year, including health-care and consumer-discretionary stocks, took the biggest hit. Health shares in the S&P 500 shed 1.2%, while consumer-discretionary stocks gave up 1.9%.
Investors flocked to haven assets. Gold futures added 1.9% to $1149.40 an ounce. Treasury prices rose, pushing the 10-year yield down to 2.096% from 2.129% on Wednesday.
The lack of guidance from the Fed minutes on when a rate increase could come has left investors parsing economic data for clues. Initial jobless claims rose 4,000 to 277,000 in the week ended Aug. 15, the Labor Department said Thursday. The level remained historically low, suggesting the labor market continues to improve.
"If the Fed does not raise rates in September, does the market therefore assume that growth is too slow?" said Ernie Cecilia, chief investment officer at Bryn Mawr Trust.
On Thursday, oil prices reversed direction after plumbing fresh six-year lows in intraday trading. Crude-oil futures rose 0.5% to $41 a barrel. Lower energy prices have curbed inflation, complicating the Fed's decision to raise rates.
In corporate news, L Brands Inc. said earnings rose 7.5% on continued sales growth and stronger margins in the latest quarter. Shares gained 2.1%.
Valeant Pharmaceuticals International Inc. shares fell 1%. The company said Thursday it will pay $1 billion for Sprout Pharmaceuticals Inc., which just won approval to sell the first drug that aims to boost a woman's libido. The Wall Street Journal reported the deal talks late Wednesday.
Shares of several large media companies fell sharply after analysts at Bernstein downgraded Walt Disney Co. and Time Warner Inc. Those stocks fell 5% and 3.7%, respectively. Viacom Inc. lost 4.2%.
Write to Dan Strumpf at email@example.com
(END) Dow Jones Newswires
August 20, 2015 14:45 ET (18:45 GMT)