Stock Market News for September 29, 2015

Continuing slump in biotech stocks and weak data out of China dragged down major benchmarks into the negative territory on Monday. Decline in industrial profits elevated concerns regarding Chinese economy, which in turn increased global growth worries. Moreover, disappointing Chinese data had a negative impact on material and energy stocks. Meanwhile, mixed economic data on the domestic front also affected markets on Monday. Both the Dow and S&P 500 registered their steepest one-day declines since Sep 1.

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The Dow Jones Industrial Average (DJI) declined 1.9%, or 312.78 points, to close at 16,001.89. The Standard & Poor's 500 (S&P 500) lost 2.6% to close at 1,881.77. The tech-laden Nasdaq Composite Index closed at 4,543.97, declining 3%. The fear-gauge CBOE Volatility Index (VIX) surged 17% to settle at 27.63. A total of around 8.3 billion shares were traded on Monday, lower than the last 20-sessions' average of 7.2 billion. Decliners outpaced advancing stocks on the NYSE. For 88% stocks that declined, 10% advanced.

China's National Bureau of Statistics reported on Monday that profits in Chinese industrial companies dropped 8.8% from the year-ago level in August. It was also reported that profits declined 1.9% through January to August year on year. Yuan's depreciation in August hurt profits of export oriented companies last month. This dismal data dampened investor sentiment by raising concerns about the weak Chinese economy, which in turn had a negative impact on markets.

Weak Chinese data dragged down oil prices on Monday. Prices of WTI and Brent crude oil declined 2.9% and 2.7% to $44.43 per barrel and $47.34 a barrel, respectively. Drop in oil prices weighed on the Energy Select Sector SPDR (XLE), which lost 4% yesterday. It was also the biggest loser among the S&P 500 sectors. Key energy stocks including Schlumberger Limited ( SLB ), Kinder Morgan, Inc. ( KMI ), EOG Resources, Inc. ( EOG ) and Chevron Corporation ( CVX ) lost 4.8%, 6.4%, 4.6% and 2.5%, respectively. All of the 10 S&P 500 sectors settled in the red on Monday.

Moreover, material stocks also took a hit following dismal economic data out of China. The Materials Select Sector SPDR (XLB) declined 3.1% yesterday. Key stocks from the sector including The Dow Chemical Company ( DOW ), LyondellBasell Industries N.V. ( LYB ), PPG Industries, Inc. ( PPG ) and Freeport-McMoRan Inc. ( FCX ) dropped 5.4%, 4.6%, 4.3% and 9.1%, respectively.

Meanwhile, biotech stocks, which were dragged lower last week after U.S. Democratic presidential candidate Hillary Clinton's comment to prevent "price gouging" for specialty drugs, continued to bleed on Monday. Shares of Valeant Pharmaceuticals International Inc. ( VRX ) plunged 16.5% yesterday after Democratic lawmakers made a push for a subpoena to force the company to turn over documents relating to "massive price increases" for two heart drugs it produces. This further intensified the selling pressure on biotech stocks.

The iShares Nasdaq Biotechnology (IBB) slumped 6.3% yesterday, witnessing its biggest one-day decline in over four years. Key biotech stocks including Celgene Corporation ( CELG ), Amgen Inc. ( AMGN ), Gilead Sciences Inc. ( GILD ) and Regeneron Pharmaceuticals, Inc. ( REGN ) declined 3.3%, 4.5%, 5.3% and 7.5%, respectively.

Separately, shares of Williams Companies, Inc. ( WMB ) nosedived 12.1% after Energy Transfer Equity, L.P. ( ETE ) said that it will acquire its rival for around $37.7 billion or $43.50 per share, representing a 4.6% premium on Friday's closing price. Williams Companies was the biggest decliner among the S&P 500 companies on Monday. Shares of Energy Transfer Equity also dropped 12.7% following the announcement.

On the other hand, Alcoa Inc.'s ( AA ) shares jumped 5.7% after announcing that it will be splitting into 2 separate public companies. Alcoa said it expects the tax-free separation to occur in the second half of 2016, and added that it "will complete a multiyear transformation". Alcoa was the biggest gainer among the S&P 500 companies on Monday.

In economic news, the National Association of Realtors (NAR) reported that the Pending Home Sales Index declined 1.4% to 109.4 in August, hitting its lowest reading in last five months. Decline in August also came in contrast with the consensus estimate of a 0.7% rise. Lawrence Yun, NAR chief economist, said: "Pending sales have leveled off since mid-summer, with buyers being bounded by rising prices and few available and affordable properties within their budget."

Though a year-over-year gain of 0.3% in PCE index - an important indicator of inflation - indicated that the inflation rate is significantly below the Fed's target of 2%, a rise of 0.4% in consumer spending in August signaled toward rising demand. It was also higher than the consensus estimate of 0.3% gain.

Meanwhile, William Dudley, New York Federal Reserve Bank President indicated that the Fed may opt for a rate hike this year and it may achieve its 2% inflation rate target by next year. He said: "If the economy continues on its trajectory ... it's a pretty strong case for liftoff." He also indicated that possibility of a rate hike in October is quite high. The Fed Chairwoman Janet Yellen also indicated last Thursday that the lift-off option is very much on the table later this year.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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