US stocks fall for second day as China growth concerns weigh

NEW YORK (BLOOMBERG) - U.S. stocks dropped, with the Standard & Poor's 500 Index headed for a one-month low, amid concern that a slowdown in China's economy will weigh on global growth.

Companies with substantial sales in China fell further after Tuesday's selloff. Apple Inc. lost 2.8 per cent after a 5.2 per cent slide, while Yum! Brands Inc. and Wynn Resorts Ltd. declined at least 2.4 per cent.

Alibaba Group Holding Ltd. sank 6.9 per cent after quarterly sales rose at the slowest pace in at least three years. Yahoo! Inc. slumped 5.7 per cent.

The S&P 500 declined 1 per cent to 2,064.32 at 9:50 a.m. in New York, below its average price during the past 200 days, after losing 1 per cent Tuesday. The Dow Jones Industrial Average sank to a six-month low, down 208.58 points, or 1.2 per cent to 17,194.26. The Nasdaq Composite Index decreased 1.2 per cent.

"China is a big growth driver around the world, so there's a certain risk to global growth," said Otto Waser, chief investment officer at R&A Research & Asset Management in Zurich. "It's affecting sentiment across the globe and it just creates more uncertainty. If the world economy turns out to be weaker, the Fed will keep an eye on the dollar."

The S&P 500 dropped the most in more than two weeks Tuesday as China devalued its currency, sparking worries that the world's second-largest economy is faltering. The U.S. benchmark index had the biggest reversal since last October's selloff, erasing three-quarters of Monday's gain - an advance that itself had wiped out the previous week's decline.

Investors are watching as rallies and retreats alternate with uncommon speed in a market that has gone virtually nowhere in seven months, even as the average daily swing widened almost 20 percent from a year ago.

China's unexpected currency move has bolstered speculation the Federal Reserve may have to delay raising interest rates. The threat of a slowdown in China could harm global growth, while lower commodity prices damp inflation. The probability of a rate increase in September slipped to 40 per cent from 54 per cent Monday, according to futures trading data compiled by Bloomberg.

Cisco Systems Inc. and News Corp. post quarterly results on Wednesday as the earnings season nears its end. About three- quarters of the S&P 500 companies that have reported so far beat profit estimates, while almost half topped sales projections. Analysts expect a 2.1 percent drop in second-quarter earnings, less than July 10 calls for a 6.4 per cent decline.

Investors will also watch economic reports this week, including U.S. retail sales and import-price data on Thursday, and industrial production and consumer sentiment on Friday.