NEW YORK (BLOOMBERG) - U.S. stocks joined a worldwide selloff, after equities' worst month in more than three years, amid continuing concerns that China's slowdown will weigh on the global economy.
The Standard & Poor's 500 Index slid 1.6 per cent to 1,941.17 at 9:32 a.m. in New York, following the benchmark's biggest monthly slide since May 2012. Equities dropped in Asia, with the Shanghai Composite Index slumping as much as 4.8 percent, after manufacturing reports pointed to a deepening Chinese economic slowdown.
"Markets may have overemphasized China's impact, but markets are also in relatively bad shape and we're getting more negative technical signals," said Otto Waser, chief investment officer at R&A Research & Asset Management AG in Zurich. "It's a close call for the Fed and as long as markets are in turbulence, I don't think it will raise rates. If the markets remain too turbulent, they will postpone to October."
International Monetary Fund Managing Director Christine Lagarde said Tuesday the global expansion outlook is worse than the lender anticipated less than two months ago. "This reflects two forces: a weaker than expected recovery in advanced economies, and a further slowdown in emerging economies, especially in Latin America," Ms Lagarde said in a speech in Jakarta.
Remarks by Federal Reserve Vice Chairman Stanley Fischer last week suggested the central bank hasn't ruled out raising interest rates when the Federal Open Market Committee gathers on Sept. 16-17. That has heightened concerns that the Fed may increase rates even as growth slows around the world. Traders are now pricing in a 38 per cent chance that it will act this month, up from 24 per cent last Wednesday.
The S&P 500 ended down 6.3 per cent in August as China's currency devaluation spurred concern over global growth, erasing more than US$5.7 trillion in equity market values worldwide.
That sparked a record jump in volatility, with the Chicago Board Options Exchange Volatility Index surging 135 per cent. The S&P 500 plunged the most since 2011 and entered a correction last week, only to then rally more than 6 percent over two days. The U.S. benchmark index closed Monday 7.5 per cent below its all-time high set in May.
Investors are watching economic data for clues on the likely trajectory of U.S. interest rates. Manufacturing growth slowed in August, according to forecasts compiled by Bloomberg before an Institute for Supply Management report at 10 a.m. Separate data may show construction spending accelerated in July. Monthly gauges yesterday on Midwest manufacturing slipped, while a measure of factory activity in Texas slid further into contraction amid the slump in the oil patch.