S&P 500 pares rally as volatile global markets seek turnaround

ANOTHER ATTEMPT at a turnaround in U.S. stocks is fading as shares from Asia to Europe struggle to find a floor amid the worst global equity rout in almost four years. / BLOOMBERG NEWS FILE PHOTO/JIN LEE
ANOTHER ATTEMPT at a turnaround in U.S. stocks is fading as shares from Asia to Europe struggle to find a floor amid the worst global equity rout in almost four years. / BLOOMBERG NEWS FILE PHOTO/JIN LEE

NEW YORK – Another attempt at a turnaround in U.S. stocks is fading as shares from Asia to Europe struggle to find a floor amid the worst global equity rout in almost four years.

The Standard & Poor’s 500 Index jumped at the market’s open and then cut that advance by more than half, after a 2.9 percent rally on Tuesday evaporated in the last hour of trading.

Attempts to push equities higher are failing across the globe. The Shanghai Composite Index ended 1.3 percent lower despite an early 4.3 percent surge. European stocks also whipsawed, erasing a 2.7 percent decline, only to slump again. Canadian equities erased a 1.6 percent surge in their first half hour of trading.

“We’re up a nervous 1 to 1.5 percent in the market, you don’t want to see this all of a sudden roll over,” Larry Peruzzi, director of international trading at Cabrera Capital Markets LLC in Boston, said by phone. “We thought with the sell- off you’d start to see some value players pick apart the market but we haven’t seen that in droves.”

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Volatility continued to ripple through the markets. Commodities resumed their decline following a reprieve Tuesday. Gold fell for a third day, the longest stretch in a month, while copper led industrial metals lower and crude traded near $40 a barrel.

Treasuries dropped and the dollar rose after American durable goods orders climbed the most in a year, paring those moves after a Federal Reserve official said a decision on higher interest rates for September was “less compelling.”

“We’ll have more volatility until we get more visibility,” said Jacques Porta, who helps oversee the equivalent of $570 million as a fund manager at Ofi Gestion Privee in Paris. “The Chinese devaluation worried investors and the economic data has struggled. The potential rate increase in the U.S. also gives worry that worldwide economic growth will slow.”

Concern that Chinese policy makers may fail to prevent a hard landing in the world’s second-largest economy has convulsed global markets, triggering a rush from all but the safest of assets. About $8 trillion has been erased from the value of global equities since China’s surprise devaluation of the yuan on Aug. 11 as investors weighed prospects for slowing growth and the first interest-rate increase in the U.S. in almost a decade.

The S&P 500 climbed 0.8 percent at 12:35 p.m. in New York, paring an early rally of 2.5 percent. The gauge fell 1.4 percent yesterday after gaining as much as 2.9 percent early in the day.

Global stock-market turmoil has weakened the case for raising interest rates in September, Federal Reserve Bank of New York President William C. Dudley said, cautioning it’s important not to overreact to short-term developments.

“From my perspective, at this moment, the decision to begin the normalization process at the September FOMC meeting seems less compelling to me than it was a few weeks ago,” Dudley told a news conference Wednesday at the New York Fed.

The Stoxx Europe 600 Index lost 1.8 percent after declining as much as 2.7 percent, at one point erasing all those losses before tumbling again.

The Shanghai Composite swung during the day, sliding as much as 3.9 percent, then rallying 4.3 percent, before closing down 1.3 percent. Hong Kong’s Hang Seng China Enterprises Index also erased earlier gains, falling 0.9 percent.

Chinese equities have lost half their value since mid-June, as margin traders closed out bullish bets. The government has halted intervention in the equity market this week as policy makers debate the merits of an unprecedented rescue, according to people familiar with the situation.

Futures on the S&P 500 tracked the gyrations in China, rising as much as 1.7 percent before paring gains. The 120-day correlation between the contracts and the movement of China’s benchmark stock gauge climbed to a record.

“The struggle between gains and losses suggests that the market doesn’t really know what to make of the policy move yet,” said Bernard Aw, a strategist at IG Asia Pte Ltd. in Singapore. “There might be a chance we could see some consolidation in the markets before investors are confident enough to push higher. This view holds barring any other shocks, such as a Fed rate hike in September.”

The MSCI Emerging Markets Index slipped 0.4 percent, after rallying 2.2 percent on Tuesday, the most in two years. Equity gauges in India, and Saudi Arabia and South Africa lost more than 1 percent. South Korea’s Kospi jumped 2.6 percent, capping the biggest two-day rally since June 2013, as tensions between North and South Korea eased.

Industrial metals declined, with nickel sliding 1 percent. Gold fell 1.3 percent to $1,123.30 an ounce.

West Texas Intermediate fell 0.5 percent to $39.11 a barrel, having earlier risen as much as 1.4 percent. Further declines in China’s stock market fanned concern that its fuel demand may slow while global crude markets remain oversupplied.

The Bloomberg Dollar Spot Index rose 0.5 percent, advancing for a second day. The currency gained 1.2 percent to $1.138 per euro, and 0.3 percent versus the yen, paring an earlier 0.9 percent advance.

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