The U.S. S&P500 stock index posted its worst daily fall
since April and its first monthly drop since January on Thursday, as economic
data sparked concern the Federal Reserve could raise interest rates sooner than
some have expected.
Data showing that U.S. labor costs recorded their biggest
gain in more than 5-1/2 years in the second quarter this year came a day after
the Fed upgraded its assessment of the U.S. economy while reiterating it
was in no hurry to raise rates. The Fed has kept overnight rates near zero
since December 2008, but at its meeting on Wednesday it took note of both
faster economic growth and a decline in the unemployment rate, while expressing
concern about remaining slack in the labor market.
On Thursday, all 10 S&P500 index stock sectors fell more
than 1.0 percent, with energy .SPNY down 2.4 percent leading the decline. Exxon
Mobil Corp's (XOM.N) second-quarter earnings beat expectations but oil
production dropped, and its shares fell 4.2 percent to $98.94.
The Dow Jones industrial average .DJI fell 317.06
points or 1.88 percent, to 16,563.3, while the S&P 500 .SPX lost
39.4 points or 2.0 percent, to 1,930.67 and the Nasdaq Composite.IXIC dropped
93.13 points or 2.09 percent, to 4,369.77.
The stock price falls pushed the Dow into negative territory
for the year. It is now down 0.1 percent since Dec. 31, while the S&P500
and Nasdaq are still higher for the year to date. The S&P500 and
Nasdaq both marked their biggest daily percentage drops since April 10. For the
Dow, the percentage drop was the biggest since Feb. 3.
In a signal of possible further weakness ahead, the
S&P500 index closed below its 50-day moving average for the first time
since April 15. For the month, the Dow was down 1.6 percent, the S&P
500 was down 1.5 percent, and the Nasdaq was down 0.9 percent.
Trading volume was much heavier than average. According to
data from BATS Global Markets, about 8 billion shares changed hands on
U.S. exchanges, well above the 5.6 billion average for the month to date.
Problems in overseas economies added to the bearish tone, with Argentina defaulting
on its debt for the second time in 12 years. Investors on Wednesday had hoped
for a midnight deal in Argentina's debt talks with so-called holdout creditors,
but the plan fell through. Even a short default will raise companies' borrowing
costs, add to pressure on the peso, drain the country's dwindling foreign
reserves and fuel what is already one of the world's highest inflation rates.
In Russia, news agencies reported that Russia banned soy
imports from Ukraine and may restrict Greek fruit and U.S. poultry in
what could be responses to new Western sanctions over Ukraine.
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