The stock markets in the United States declined today primarily to investors’ concern regarding China’s currency devaluation, a sign that the country’s economy is probably diving deeper.
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In an interview with Bloomberg, Tom Wright, director of equities at JMP Securities commented, “The driving forces today continue to be macro-oriented with China the most important. We spend a lot of time obsessing over Greece or Puerto Rico, but China is a much bigger economy and a much bigger problem to the global economy and devaluing the currency is shaking people up.”
The central bank of China reduced its daily reference rate by 1.9%. As a result, the yuan suffered the biggest one-day drop since China ended the dual-currency systems in January 1994.
The People’s Bank of China explained that its action was a one-time adjustment intended to be more aligned with supply and demand. The surprising move also had a negative impact on other equity markets around the world. Investors selloff their positions in emerging-market currencies, commodities, auto and luxury stocks with exposure to China.
[drizzle]The futures trading data compiled by Bloomberg showed that the probability rate of an interest rate increase by the Federal Reserve dropped from 54% to 46%.
Today, the U.S. Department of Labor reported that the worker’s productivity per hour increased 1.3% from April to June, lower than the 1.6% expected bu economists polled by Bloomberg.
U.S. Markets
- Dow Jones Industrial Average (DJIA) – 17,402.84 (-1.21%)
- S&P 500- 2,084.07 (-0.96%)
- NASDAQ- 5,036.79 (-1.27%)
- Russell 2000- 1,221.14(-0.94%)
European Markets
- EURO STOXX 50 Price EUR- 3,605.28 (-1.90%)
- FTSE 100 Index- 6,664.54 (-1.06%)
- Deutsche Borse AG German Stock Index DAX- 11,293.65 (-2.68%)
Asia-Pacific Markets
- Nikkei 225- 20,720.75 (+0.42%)
- Hong Kong Hang Seng Index- 24,498.21 (-0.09%)
- Shanghai Shenzhen CSI 300 Index- 4,066.67 (-0.43%)
Stocks in Focus
The stock price of Apple declined more than 5% to $113.49 per share. The iPhone maker is one of the companies with exposure to China that were negatively impacted by the yuan devaluation. Separately, a report indicated that China’s smartphone manufacturer is becoming increasingly popular, and it might become an iPhone killer.
The shares of Google climbed more than 4% today. The Class A shares (GOOGL) of Google closed $690.30 while the Class C shares (GOOG) closed $660.78. Yesterday, the search engine giant announced the establishment of a new public holding company called Alphabet, which will become Google’s parent company. Stifel analyst Scott Devitt upgraded his stock rating on Google to Buy with a price target of $850 per share.
Avid Technology plummeted almost 29% to $8.54 per share. The digital media company reported disappointing earnings for the second quarter. Avid Technology reported earnings of $0.05 per share, significantly lower than the $0.20 per share expected by analysts. Its revenue declined 12% to $112 million, lower than the $125 million consensus estimate.
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