U.S. stocks fell sharply by more than 2% on Thursday extending one of the worst starts to a year in a quarter-century, after the People's Bank of China roiled global markets with a surprising decision to adjust its daily fix against the yuan.
In overnight trading, China rattled global markets when its benchmarkShanghai Composite Index plummeted 7% within a half-hour of the start of trading, prompting its second circuit breaker in the span of four days. Earlier on Thursday, the PBOC set the midpoint of the yuan at 6.5646 against the dollar, 0.51% lower than the previous day's rate, representing the sharpest fall in the daily fixing since the currency's massive depreciation in mid-August.
The Dow Jones Industrial Average fell by as much as 420 points, briefly dropping 10% below its yearly-high from last May, before paring some of the losses late in the session to close at 16,514.10, down 392.41 or 2.32%. A weak session among tech stocks also pulled down the NASDAQ Composite index, which closed at 4,689.43, down 146.34 or 3.03%. The NASDAQ, which suffered its sixth straight loss, entered correction territory at one point on Thursday.
The S&P 500 Composite Index, meanwhile, lost 47.17 or 2.37% to 1,943.09, as all 10 sectors closed in the red. Stocks in the Technology, Basic Materials and Financials industries lagged, each falling by more than 2% on the session. A prolonged slump in oil prices also weighed on energy and drilling stocks, as crude futures tumbled below $34 a barrel to fresh 12-year lows. At one point on Thursday, the major indices hit a fresh three-month low.
The top performer on the Dow was Wal-Mart Stores Inc (N:WMT), which gained 1.48 or 2.33% to 65.03. Wal-Mart (N:WMT), the lone Dow component to close in the green, closed on Wednesday as the top performer on the Dow for the third straight day. In December, the largest retailer in the U.S. offered deep discounts on technology products and video games in the post-Christmas shopping season to offset slow holiday sales. Wal-Mart closed as the top performer on the Dow for the second consecutive session. Since bottoming to a 52-week low in November, Wal-Mart shares are up by more than 12%.
The worst performer was GE, which lost more than 4% to 28.97 after reports surfaced that the multinational conglomerate signed as much as $157 billion in deals last year to reduce the scope of its finance arm. GE finished just below Bank of America Corporation (N:BAC), which fell 5.82 or 4.19% to 133.01. On Thursday, the Everett, Washington-based aerospace giant said its aircraft orders fell by nearly half to 768 last year, dropping it below chief rival Airbus.
The biggest gainer on the NASDAQ was Walgreens Boots Alliance Inc (O:WBA), which added 1.54 or 1.93% to 81.17, after company executives defended its deal with Valeant Pharmaceuticals International Inc (N:VRX) on a conference call on Thursday. Under the deal, Walgreen's pharmacy will fill prescriptions for Valeant's skin and eye treatments over the next 20 years. The worst performer was Incyte Corporation (O:INCY), which lost 6.36% to 95.76. Incyte finished just below Yahoo! Inc (O:YHOO), which fell 2.00 or 6.22% to 30.16, after activist investor Starboard Value threatened to stage a proxy fight against the company's board unless significant changes are made, including the dismissal of CEO Marissa Mayer.
The top performer on the S&P 500 was Gap Inc (N:GPS), which added 1.45 or 5.73% to 26.74, after receiving a "market perform" rating from analysts at FBR& Co. Last year, Gap shares tumbled more than 40% as the San Francisco-based retailer announced wholesale changes, including massive layoffs to boost major earnings losses. The worst performer was Williams Companies Inc (N:WMB), which fell 2.29 or 10.00% to 20.61, amid the latest drop in oil.
On the New York Stock Exchange, declining issues outnumbered advancing ones by a 2,688 to 422 margin.
