U.S. stocks sell off amid global jitters, NYSE trading halt
U.S. stocks closed sharply lower on Wednesday after trading on the New York Stock Exchange was halted for three-and-a-half hours.
Stock prices were trading sharply lower even before the trading suspension as investors grappled with a precipitous selloff in Chinese shares and nervousness over unresolved Greece debt crisis.
Trading of all securities at NYSE was halted from 11:32 a.m. Eastern until 3:10 p.m. Eastern due to a technical glitch, while the exchange spokesperson it was not due to a cyber attack.
The main indexes saw steady selling pressure throughout the session, while implied volatility as measured by the CBOE Volatility index VIX, +22.19% jumped 22% to above 19. Market reaction to the release of Federal Reserve minutes was largely muted.
The S&P 500 SPX, -1.67% lost 34.65 points, or 1.7%, to close at 2,046.69, its lowest closing level since March. All 10 main sectors finished lower.
The Dow Jones Industrial Average DJIA, -1.47% dropped 261.49 points, or 1.5%, to 17,515.42, its lowest closing level since February.
The Nasdaq Composite COMP, -1.75% declined 87.70 points, or 1.8% to close at 4,909.76.
Randy Frederick, managing director of trading and derivatives at the Schwab Center for Financial Research, said he wasn’t surprised by lack of reaction to the FOMC minutes.
“Compared to the crash in Chinese shares and events in Greece, the release of minutes is a minor event,” Frederick said.
Frank Cappelleri, executive director at Instinet, LLC said it was ironic that the glitch happened just when the S&P 500 was testing the 200-day moving average.
“While, this is not yet creating panic, the more uncertainty there is, the less conviction in the market and more skittishness,” Cappelleri said.
Chris Gaffney, president at EverBank World Markets, said a crash in China’s stock market has sent shock waves though equity and commodity markets.
“Investors are much more worried about China, Greece and to some extent Iran, than about Fed minutes,” Gaffney said.
“While U.S. markets are not as overvalued as China was, this still might trigger an overdue correction. And if we do not see a pick up in consumer spending, which ultimately drives the economy and earnings, we may see a major correction,” Gaffney added.
China selloff: The slump in U.S. market comes against a backdrop of sharp losses in the Chinese stock markets. The Shanghai Composite Index SHCOMP, -5.90% has now shaved off more than 30% of its value over the past month.
Greece is still the word: The Greek debt crisis remains a focus after Tuesday’s Eurogroup meeting and eurozone leaders’ summit concluded without progress on a bailout deal. The EU has now given Athens a deadline of Sunday to produce a credible reform proposal and reach an agreement with lenders, or risk sliding into bankruptcy and a eurozone exit.
Greece’s banks and stock markets remained shut on Wednesday, but the Global X FTSE Greece 20 ETF GREK, -5.00% fell 5%. European markets closed marginally higher.
FOMC minutes: Only one of the 10 Fed officials who have a vote this year was ready to hike rates in June, but that official expressed a willingness to wait “another meeting or two,” according to minutes of the U.S. central bank’s meeting released Wednesday.
Earnings season: The second-quarter earnings season unofficially kicked off after the market close, when Alcoa Inc. AA, -0.10% released its results. The aluminum producer’s sales topped expectations.
“The earnings slowdown is just another headwind facing a U.S. stock market that is already coping with above-average valuations, fallout from the Greece debt drama, a bear market in Chinese stocks, and the uncertainty surrounding the timetable for the Federal Reserve’s first interest-rate hike since before the 2008 financial crisis,” analysts at London Capital Group said in a note.
Movers & shakers: Tesla Motors Inc. TSLA, -4.82% lost 4.8% after Pacific Crest downgraded the electric car maker to sector weight from overweight on concerns over valuation.
J.P. Morgan Chase & Co. JPM, -2.05% fell 2% after people familiar with the matter said the bank intends to pay at least $125 million to settle credit-card probes, according to The Wall Street Journal.
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