Wednesday, January 13, 2016

Stocks Sell Off Broadly; Dow Hits Lowest Level Since September
Oil-glut anxieties seen weighing on energy sector

Wall Street Journal
Jan. 13, 2016 4:12 p.m. ET

A broad selloff in stocks accelerated Wednesday, dragging the Dow Jones Industrial Average to its lowest level since late September.

The Dow industrials fell 365 points, or 2.2%, to 16151. The S&P 500 dropped 2.5% and the Nasdaq Composite declined 3.4%. All three indexes entered correction territory.

Wednesday’s losses follow a rough first week for U.S. stocks. The Dow has declined 7.3% so far this year and the S&P 500 has dropped 7.5%, as concerns about global growth flared up and oil prices careened lower.

A drop in consumer-discretionary stocks, the best performing sector over the past year, spilled over into the broader market. Those stocks in the S&P 500 fell 3.4%. Auto-parts maker BorgWarner shares dropped 9.5% and shares in Netflix tumbled 8.6%.

All S&P sectors have posted losses in 2015. The smallest decline is in the utilities sector, underscoring the level of nervousness among investors. Those stocks, which tend to pay out high dividends and are considered more defensive bets, have slipped 0.3% this year.

“You look across the spectrum, and there’s been nowhere to really go and hide,” said Sahak Manuelian, managing director in equity trading at Wedbush Securities.

Some of the biggest gainers of 2015 fell Wednesday., which contributed the most points to the S&P 500 last year, fell 5.8%. Google parent Alphabet shares fell 3.5% and Facebook shares lost 4%. The Nasdaq Biotechnology Index dropped 5.3% and is now down 17% so far this year.

Stocks have swung intraday in recent sessions, as investors remain ultrasensitive to changes to the price of oil and updates on global growth.

“Until there’s something for investors to feel good about...they’re going to be a little reticent to jump in with both feet,” said Gordon Charlop, managing director at Rosenblatt Securities. He added that investors will look through fourth-quarter earnings for clues on the health of the global economy.

Major reports this week include J.P. Morgan Chase & Co., Intel Corp. and Wells Fargo & Co.

Further evidence of a glut of crude weighed on oil prices and energy stocks. U.S. crude oil bounced around during the session, but settled well below earlier levels after data showed inventories of crude oil and refined products hit record highs. U.S. crude oil settled 0.1% higher to $30.48 a barrel, while energy stocks fell 1.8%.

The dollar rose against the currencies of commodity producing countries and pared gains against the yen.

The buck was recently up 0.8% against the Canadian dollar at 1.4370, its highest level since 2003. The Australian dollar was off 0.4% against the greenback at $0.6965. The U.S. dollar gained 0.3% against the Mexican peso to 17.94.

At the same time, the buck shed its gains against the yen, a currency that often attracts buying during times of heightened uncertainty in markets. The dollar was recently up 0.1% at Y117.74, down from a high of Y118.38 earlier in the session.

Elsewhere, the Stoxx Europe 600 rose 0.4%.

Chinese shares took a late-session dive. The Shanghai Composite dropped 2.4%, ending below 3000 for the first time since August. Still, the moves were muted compared with last week’s sharp declines.

The yuan continued to steady, calming fears that authorities were weakening the currency to revive the country’s slowing growth. Meanwhile, according to the General Administration of Customs, China’s exports fell 1.4% in December in dollar terms from a year earlier, while imports last month fell 7.6%. Both figures exceeded expectations.

While Wednesday’s Chinese economic data may offer some relief to investors, major bourses globally remain down for the year, and fears about the slowdown in China and its impact on global growth are likely to persist.

“The fundamental concerns are well founded: we’ve been very worried about the path of the Chinese economy for some time,” said Paul Markham, global equity portfolio manager at Newton Investment Management, an asset-management arm of BNY Mellon, who highlighted outsize leverage in the Chinese banking system.

“I think 2016 will be a more challenging year for global markets,” said Mr. Markham, noting that valuations in the U.S. are quite high, and “the unconditional support from central banks which we’ve had, certainly in the U.S., has come to an end.” The U.S. Federal Reserve raised short-term interest rates in December for the first time in nearly a decade.

In other markets, Australia’s S&P/ASX 200 rose 1.3%, while Japan’s Nikkei Stock Average rallied 2.9%.

Gold rose 0.2% to $1,087.50 a troy ounce. The yield on the 10-year Treasury note fell to 2.052%, compared with 2.100% on Tuesday. Yields fall as prices rise.

General Motors will boost a stock-repurchase plan it announced last year by 80% to $9 billion and extend the program through 2017. The auto maker also raised its quarterly dividend and boosted its earnings outlook. Shares added 0.6%.

--Riva Gold and Chao Deng contributed to this article.

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