NEW YORK - U.S. stocks stumbled on Wednesday as investors were unnerved by another steep drop in the price of oil, more signs of weakness in China and claims from the reclusive government of North Korea that it had successfully tested a powerful nuclear weapon. The price of oil fell to its lowest level since late 2008 and a key benchmark of the U.S. market was headed for its lowest close since October.
KEEPING SCORE: The Dow Jones industrial average dropped 250 points, or 1.5 per cent, to 16,907 as of 3:35 p.m. Eastern time. The Standard & Poor's 500 index lost 26 points, or 1.3 per cent, to 1,989. The S&P 500 hasn't closed below 2,000 since Oct. 14. The Nasdaq gave up 54 points, or 1.1 per cent, to 4,836. The S&P 500 is on track for its fourth decline in five days.
CHINA CONCERNS: Worries about the health of the Chinese economy continued to drive the market in 2016. A monthly survey of China's service industries slipped to a 17-month low, renewing fears that the second-largest economy in the world was stumbling. That helped knock the price of oil lower since China, the No. 2 global economy, is a major consumer of energy.
NORTH KOREA: Global markets were rattled after North Korea said that it had conducted its first successful test of a hydrogen bomb. Experts in South Korea and the U.S. doubted that the country had made that breakthrough, however the country's announcement still caused widespread alarm.
THE QUOTE: Scott Wren, senior global equity strategist for the Wells Fargo Investment Institute, said the market was overreacting to the latest signs of weakness in China.
“Stocks are not trading on fundamentals,” he said. “They're trading on fear that Chinese growth is going to collapse and that these lower oil prices are going to lead to a growing number of defaults in the high-yield bond market.”
ENERGY: U.S. benchmark crude sank $2, or 5.6 per cent, to close at $33.97 a barrel in New York, its lowest price since December 2008. Brent crude, a benchmark for international oils, fell $2.19, or 6 per cent, to close at $34.23 a barrel in London.
The price of wholesale gasoline sank 9.5 cents, or 7.6 per cent, to $1.162 a gallon after the U.S. government said inventories of gas climbed by 10.6 million barrels last week. Citi Investment Research analyst Edward Morse said that was the biggest weekly increase since 1993.
Marathon Oil declined $1.41, or 11.1 per cent, to $11.35 and Murphy Oil shed $2.66, or 11.8 per cent, to $19.93.
Heating oil sank 4.5 cents, or 4 per cent, to $1.081 a gallon. Natural gas declined 5.6 cents, or 2.5 per cent, to $2.267 per 1,000 cubic feet.
BONDS: The markets have endured a rough few days to start 2016. J.J. Kinahan, chief markets strategist for TD Ameritrade, said that's making bonds more appealing.
“Bonds have been up a lot this year even though the interest rates are nothing to be excited about,” he said. “They want the security of knowing that their money is safe.”
U.S. government bond prices rose Wednesday. The yield on the 10-year Treasury note fell to 2.18 per cent from 2.24 per cent.
PUMP THE BRAKES: Auto retailer AutoNation (
NYSE:AN,
Forum) said it had to offer large discounts in December, especially on luxury vehicles. The company said it will report smaller profits per vehicle in the fourth quarter. The stock dropped $7.21, or 12.7 per cent, to $49.54.
CHIPOTLE HIT AGAIN: Chipotle Mexican Grill (
NYSE:CMG,
Forum) said it received a federal grand jury subpoena as the government looks into norovirus outbreak at a California restaurant this summer. Chipotle also disclosed that sales at restaurants open at least one year plunged 30 per cent in December in the wake of an E. coli outbreak that affected dozens of restaurants and a norovirus outbreak in one location in Massachusetts. The stock lost $23.13, or 5.2 per cent, to $425.90. Chipotle has fallen 40 per cent since the outbreaks began in October.
NETFLIX JUMPS: Netflix (
NASDAQ:NFLX,
Forum) made the biggest gain on the S&P 500. At the Consumer Electronic Conference, the streaming video company said its service is now available in every country in the world except for China, Syria, North Korea and Crimea. Its shares rose $6.17, or 5.7 per cent, to $113.83.
CURRENCIES: The euro edged up to $1.0758 from $1.0744. The dollar fell to 118.62 yen from 118.97 yen late Tuesday.
OVERSEAS: France's CAC 40 shed 1.3 per cent and Germany's DAX dropped 0.9 per cent. Britain's FTSE 100 fell 1 per cent. Japan's Nikkei 225 index lost 1 per cent and South Korea's Kospi fell 0.3 per cent. Hong Kong's Hang Seng shed 1 per cent. The Shanghai Composite Index in mainland China rebounded 2.3 per cent, as the Chinese government said it will keep some market-stabilizing measures in place.
METALS: The price of gold rose $13.50, or 1.3 per cent, to $1,091.90 an ounce. Silver inched up 0.5 cents to $13.976 an ounce. Copper slid 0.8 cents to $2.088 a pound.