Stocks are falling today amid worries about Chinese debts and as
investors take profits following a string of winning sessions.
S&P 500 futures are down about two-thirds of a percent,
matching declines of a similar magnitude in Europe. Shanghai fell
1.25 percent and Tokyo lost 2 percent. Commodities are down and the
safe-haven Japanese yen is rallying.
The S&P 500 has climbed in nine of the last 10 sessions and has
closed at new record highs every day since Thursday. Large amounts
of cash on the sidelines, a modestly growing economy, and
easy-money policies by the Federal Reserve have kept the money
flowing into stocks.
Today's weakness comes after bad loans written off by Chinese banks
tripled, spurring fears that defaults will increase going forward.
Attention now turns to corporate earnings in the United States,
with heavyweights including Caterpillar, Boeing, and Bristol-Myers
Squibb issuing results.
CAT missed expectations by a wide margin, continuing a pattern of
weakness, and is down 3.5 percent in early trading. BA is up 2
percent after surpassing consensus and raising guidance. BMY also
beat but hasn't traded yet this morning.
Traders may also be watching the Nasdaq 100 and technology stocks
after chip makers Broadcom and Altera cited weak mobile demand
yesterday afternoon. High flyer Netflix.com also reversed sharply
yesterday and closed down 9 percent despite a strong quarterly
report. Investor Carl Icahn disclosed that he is selling 3 million
shares of NFLX but still owns 4.5 percent of the company.
Another theme could be rotation into stocks that benefit from lower
interest rates such as utilities and real-estate investment trusts.
Both have outperformed the broader market in the last week
following a long period of weakness. (See
Worries about China are hitting oil, led by a 1.2 percent drop by
West Texas Intermediate. Brent crude is only lower by a quarter
percent. That price differential is potentially bullish for refiner
stocks, which have also seen
bullish option activity
of late. Copper fell 1.4 percent and precious metals are down about
Foreign-exchange trading is following a similar pattern, with the
euro, Australian dollar, and Canadian dollar are trading lower. The
Japanese yen is up across the board, a classic pattern of risk