China’s banks weigh heavily on Wall St
US STOCKS fell yesterday as investors worried that China’s banks could hit the brakes on lending to stem market excesses, a move that could curb the global economic recovery.
Concerns about China hurt commodity prices and hit shares in the energy and raw materials sectors, while a steep drop in US durable goods orders in June fed fears of more economic weakness.
Oil futures fell $3.88, or 5.8 per cent, to settle at $63.35 per barrel after US government data showed a surprisingly large increase in crude inventories last week. Shares of energy companies also slid, with Chevron down 1.8 per cent at $67.12. The S&P energy index dropped 2.1 per cent.
China’s two biggest state-owned commercial banks have put a lid on their 2009 lending targets, a move that will significantly slow overall Chinese credit growth in the year’s second half.
Further weighing down stocks, yields of shorter-dated US Treasuries briefly hit five-week highs while their prices plunged after the week’s second poor auction, increasing concern of a possible spike in borrowing costs.
The Dow Jones industrial average dropped 26 points, or 0.29 per cent, to close at 9,070.72. The Standard & Poor’s 500 Index fell 4.47 points, or 0.46 per cent, to 975.15. The Nasdaq Composite Index lost 7.75 points, or 0.39 per cent, to 1,967.76.
Each of the three major US stock indexes gained 11 per cent in the previous two weeks as upbeat corporate earnings gave a second wind to a rally that drove the S&P 500 up 40 per cent from a 12-year low hit in early March.
The S&P 500’s only positive sectors were telecommunication services, healthcare and consumer staples, the ones seen as able to better weather economic downturns.
Caterpillar shed 2.5 per cent to $41.83 and was a top drag on the Dow industrials.
Among the Nasdaq’s major decliners, Yahoo shares tumbled after the internet media company announced an advertising deal with Microsoft.
Shares of Google, a direct competitor of the new partnership, fell 0.8 percent to $436.24.
Decliners outnumbered advancers on the NYSE by a ratio of about 3 to 2. On the Nasdaq, eight stocks fell for every five that rose.