US STOCKS-Wall St Takes More Than 2% on Growth Concerns; attention turns to the Fed
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* Energy and bank stocks lead to market declines
* All eyes on the Fed policy meeting later this week
* Major airlines mingle as US relaxes travel rules
* Indices down: Dow 2.23%, S&P 2.24%, Nasdaq 2.63% (add comment, details; update prices)
By Devik Jain
Sept. 20 (Reuters) – US stocks fell sharply on Monday as sentiment of risk aversion gripped investors over concerns about the pace of global growth and a possible spillover of Evergrande’s problems in China, ahead of the Federal Reserve policy meeting later this week.
The Nasdaq fell 2.9% in afternoon trading, due to lower growth names such as Microsoft Corp, owner of Google Alphabet Inc, Amazon.com Inc, Apple Inc, Facebook Inc and Tesla Inc.
“The potential default of the Chinese real estate developer could have far-reaching and unintended consequences. There is the X factor, the potential that the ripples of a collapse could erode other sectors,” said Danni Hewson, financial analyst at AJ Bell.
“If the Chinese economy is shaken, what happens to the demand for these good guys like a shiny new Tesla. The automaker’s shares have fallen and the Nasdaq with them, in fact, the heavy tech index gives a pretty grim sight today. “
All 11 major S&P sectors fell. Economically sensitive industry, finance and energy fell between 1.9% and 4%.
The banking sub-index fell 3.9%, following US Treasury yields, as concerns over Evergrande’s default appeared to affect the wider market, commodities slipping and investors flocking to the perceived safety of bonds.
Major Wall Street indexes have been hit this month by fears that potentially higher corporate tax rates will hurt profits and have ignored signs that inflation may have peaked.
The S&P 500 is down 4.6% from its September 2 intra-day high and is close to ending a seven-month winning streak.
“It’s just an environment where there has been a lot of money that has been rewarded for taking excessive risk. And now we see a bit of that risk coming off… it’s classic profit taking,” said Dennis Dick, a trader at Bright Trading LLC.
“I still think a big reason for (today’s sale) is that the White House and the Biden administration are talking about raising the capital gains rate.”
All eyes will be on the Fed policy meeting on Wednesday, where the central bank is expected to lay the groundwork for tapering, although the consensus is that an actual announcement will be delayed until the November or December meetings.
At 1:30 p.m. ET, the Dow Jones Industrial Average was down 772.43 points, or 2.23%, to 33,812.45, the S&P 500 was down 99.47 points, or 2.23%, at 4,333.52.
The Nasdaq Composite lost 396.26 points, or 2.63%, to 14,647.71, its worst day since May 12.
Morgan Stanley strategists said they expected a 10% correction in the S&P 500 as the Fed begins to ease monetary support, adding that signs of slowing economic growth could deepen it to 20% .
The CBOE volatility index, known as the Wall Street fear gauge, hit its highest level in more than four months.
Air carriers have traded mixed positions after the United States eased travel restrictions on air passengers from China, India, Britain and many other European countries who have received COVID-vaccines. 19 early November.
Falling issues outnumbered advances for an 8.44-to-1 ratio on the NYSE and a 5.54-to-1 ratio on the Nasdaq.
The S&P Index recorded no new 52-week highs and three new lows, while the Nasdaq recorded 19 new highs and 165 new lows. (Reporting by Devik Jain and Sagarika Jaisinghani in Bangalore; Editing by Arun Koyyur, Maju Samuel and Sriraj Kalluvila)