U.S. stocks close out their worst month in 3 years

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Mark Lennihan/ AP

This Aug. 9, 2011, file picture, reveals a Wall Street street indication near the New York Stock Exchange, in New York.

Monday, Aug. 31, 2015|2:07 p.m.

NEW YORK– August was a brutal month for financiers.

Worries about a stagnation in China’s economy and concerns about when the Federal Reserve will raise rate of interest pushed stocks dramatically lower this month. While the market recovered much of the ground it lost, the Requirement & & Poor’s 500 index still finished August down 6.3 percent, its worst showing given that May 2012.

The selling started midway through the month after China stunned financiers by devaluating its currency. The move, an effort to enhance China’s economy, appeared to have the opposite result. Worldwide financiers translated the choice as an indicator that China’s economy, the second-largest in the world, was growing more gradually than anticipated. That integrated with another plunge in Chinese stocks sent red flags in Asia, Europe and the Americas.

The selling was fierce and deep. Trading volume, which usually slows in summer, surged. The S&P 500 index at one point fell under exactly what’s called a “correction,” which is when an index falls 10 percent or more from a recent high.

On Monday the decreases were relatively modest. The Dow Jones industrial average gave up 114.98 points, or 0.7 percent, to close at 16,528.03. The S&P 500 lost 16.69 points, or 0.8 percent, to 1,972.18 and the Nasdaq composite lost 51.82 points, or 1.1 percent, to 4,776.51.

The losses had been deeper, but oil costs, which were solidly lower earlier in the day, jumped after the U.S. Energy Department cut its price quote for the country’s oil production. The news sent energy stocks higher, making energy the only industry in the S&P 500 to close with a gain.

U.S. crude rose $3.98, or almost 9 percent, to $49.20 a barrel in New York. Brent crude, the international requirement, jumped $4.10 to $54.15 a barrel in London.

It had not been like U.S. markets were in best shape prior to China’s spooked them. Financiers had actually recently trudged through a business profits season which delivered just weak earnings growth.

“Earnings development is subsiding and stock valuations are either completely valued or even a little miscalculated today. I think the investor complacency we had previously in the summertime has made this market topped to overact to generally anything out there,” said Scott Clemons, primary financial investment strategist at Brown Brothers Harriman Private Bank.

Things are not likely to alter in September. Even setting aside the historic reputation of September being among the toughest months for the marketplace, investors will certainly have to contend with the Federal Reserve’s interest rate meeting on September 16 and 17 and more economic data from the U.S. and China that could drastically swing the market from one way to another.

“Concerns over slowing growth in China are unlikely to disappear. Many financiers have actually long awaited indications that China was on the brink of implosion,” stated Bob Doll, chief equity strategist at Nuveen Property Management.

Investors are likewise keeping a close eye on the Federal Reserve.

Fed Vice Chairman Stanley Fischer said over the weekend that policymakers still had a “pretty strong case” for raising rates in September. That ran counter to recent market belief that China’s economic downturn and international market volatility may trigger the country’s reserve bank to wait.

Speaking at the Fed’s annual event in Jackson Hole, Wyoming, Fischer highlighted he was not saying exactly what action the Fed may take at its September conference, however analysts took his remarks to imply he saw the economy moving close to satisfying the Fed’s conditions for a hike. The Fed has kept rates ultra-low given that the 2008 financial crisis.

Asian markets had another rough day. The Shanghai Composite Index fell as much as 2.6 percent, but recovered to close 0.8 percent lower. Hong Kong’s Hang Seng likewise invested most of the day in the red before closing up 0.3 percent. Tokyo’s Nikkei 225 lost 1.3 percent.

European stocks also fell. Germany’s DAX lost 0.4 percent and France’s CAC-40 lost 0.5 percent. U.K.’s markets were closed for a vacation.

U.S. government bond rates fell. The yield on the 10-year Treasury note increased to 2.22 percent from 2.18 percent late Friday. The dollar decreased to 121.22 yen from 121.38 yen on Friday. The euro rose to $1.120 from $1.1180.

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