Stocks in tailspin as China adds to Federal Reserve worries
Stocks plunged Thursday continuing the flight from stocks and bonds as traders reacted to news that the Federal Reserve could end its massive bond-buying program. A slowdown in Chinese manufacturing added to Wall Street's worries.
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Government bonds are used as benchmarks for mortgage rates. The sharp increase in yields prompted investors to sell the stocks of homebuilders, whose business could be hurt if the pace of home buying slows down. Even an encouraging report on home sales Thursday failed to arrest the slide.Skip to next paragraph
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PulteGroup plunged $1.89, or 9.1 percent, to $18.87. D.R. Horton fell $2.13, also 9.1 percent, to $21.31.
Markets were also unnerved after manufacturing in China slowed at a faster pace this month as demand weakened. That added to concerns about growth in the world's second-largest economy. A monthly purchasing managers index from HSBC fell to a nine-month low of 48.3 in June. Numbers below 50 indicate a contraction.
In commodities trading, gold plunged to its lowest point since September 2010, falling $87.80, or 6.4 percent, to $1,286.20 an ounce.
Traders sold the precious metal as its appeal as insurance against inflation and a weak dollar faded. Both became less of an issue after the Fed said it was contemplating an end to its bond-buying program.
The rising dollar pushed oil prices lower. A stronger dollar makes oil more expensive for holders of other currencies. The price of crude oil fell $2.84, or 2.9 percent, to finish at $95.40 a barrel in New York, its biggest drop since November
Some investors said the sell-off in stocks may be overdone. The Fed is considering easing back on its stimulus because the economy is improving. The central bank has upgraded its outlook for unemployment and economic growth.
The S&P 500 is still up 11.3 percent, for the year, not far from its full-year increase of 13.4 percent last year.
"People are overreacting a little bit," said Gene Goldman, head of research at Cetera Financial Group. "It goes back to the fundamentals, the economy is improving."
In other trading, the Nasdaq composite fell 78.57 points, or 2.3 percent, to 3,364.63.
Among other stocks making big moves:
— GameStop, a video game store chain that sells new and used games, rose $2.41, or 6.3 percent, to $40.94 after Microsoft backpedaled and said that there will be no limitations on sharing games on its upcoming Xbox One gaming console.
— Rite Aid fell 23 cents, or 7.4 percent, to $2.88 after the nation's third-largest drugstore chain lowered its forecast for 2014 earnings.
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