By Leslie Josephs
U.S. stocks tumbled to a more than one-month low on Monday,
weighed down by the health-care sector, as politicians ramped up
scrutiny of drug pricing.
The Dow Jones Industrial Average dropped 312.78 points, or 1.9%,
to 16001.89, its lowest closing level since August 25. The Dow had
dipped below 16000 for the first time since Sept. 1 on an intraday
basis.
The S&P 500 fell 49.57 points, or 2.6%, to 1881.77, while
the Nasdaq Composite dropped 142.53 points, or 3%, to 4543.97.
Valeant Pharmaceuticals International Inc. shares fell 16.5% to
$166.50 after Democrats on the House oversight committee asked the
committee chairman to force Valeant to provide documents explaining
price increases for two heart drugs.
Last week, biotechnology stocks fell after Hillary Clinton
targeted specialty drug makers, tweeting about a plan that would
counter "price gouging" and proposing new rules that would control
prescription-drug spending.
The Nasdaq Biotechnology Index fell 6% on Monday, erasing gains
for the year
"The language environment in [pharmaceutical pricing] is going
to be negative in the space," said Jeffrey Yu, head of single stock
derivatives trading at UBS AG. Investors are "naturally...going to
express some type of concern."
Mr. Yu added that many investors are looking to sell their
biggest gainers of the year before the end of the quarter to take
profits.
James Hartwell, president of Deer Park, Ill.-based Essex LLC,
said he has reduced exposure to the biotechnology sector by 15%
this year because the sector had appreciated so much. "It's been
performing so well," he said, adding that his strategy for the
remainder of the year is to "just buy into the weakness of
companies you want to own in the long term."
Energy and raw-material producing companies also posted sharp
declines on Monday as commodity prices fell following a report
showing industrial profits in major commodity consumer China fell
8.8% in August from a year ago.
Shares in commodities giant Glencore PLC sank more than 29% to
an all-time low as the mining company continued to suffer from a
slump in commodity prices and concerns over its debt-laden balance
sheet.
In the U.S., shares of Williams Cos. fell 12.1% to $36.56 after
Energy Transfer Equity LP said it would buy the rival pipeline
operator for about $32.6 billion.
Copper miner Freeport McMoRan Inc. dropped 9.1% to $8.91, as
base metals prices continued to slip.
Alcoa Inc. shares rose 5.7% to $9.59 after the aluminum maker
said it would split into two publicly traded companies, one
focusing on mining and refining and the other on more finished
industrial products.
Chesapeake Energy Corp. shares lost 9.2% to close at $6.71.
Nymex crude-oil futures fell $1.27, or 2.8%, to $44.43 a
barrel.
Concern over a slowdown in China, the world's second-largest
economy, and its potential impact on the Federal Reserve's plans to
normalize monetary policy after years of rock-bottom rates, has
fueled market volatility in recent weeks. Some investors
interpreted the Fed's decision to keep short-term rates near zero
at its meeting in September as a lack of confidence in the U.S.
economic recovery.
Global markets rallied Friday after Fed Chairwoman Janet Yellen
laid out plans for an increase in rates by the end of the year, but
the bounce-back was short-lived.
Federal Reserve Bank of New York President William Dudley said
Monday the central bank will likely raise rates later this year.
Mr. Dudley also emphasized that a rate increase could come at any
Fed meeting, including in October. That intensified the focus on
Friday's nonfarm payrolls report for September, the last one before
the Fed's October meeting.
The yield on the benchmark 10-year Treasury note was 2.100%,
compared with 2.167% on Friday, as demand for haven assets rose.
Yields fall as prices rise.
If the central bank doesn't raise rates, it could have an even
worse effect on share prices, said Keith Bliss, senior vice
president at brokerage Cuttone & Co.
"If we're in an economic situation where we can't support [a
quarter-basis point rate increase], then we're in bigger trouble
than we all realize," he said.
In Asia, the Nikkei 225 Stock Average closed down 1.3%, while
the Shanghai Composite rose 0.3%.
Citigroup lowered Monday its forecast for global growth in 2016,
reducing it to 2.9% from 3.1%. It was 3.5% as recently as May. In a
note, economists at the bank said a global recession is a "rapidly
rising and significant risk."
European auto and mining stocks fell sharply Monday. Volkswagen
AG shares dropped 7.3%, amid the continuing emissions-test scandal
that has hit the company.
In currency markets, the euro rose 0.4% against the dollar,
trading at $1.1238. The dollar fell 0.6% against the yen.
Gold fell 1% to $1,133.00 a troy ounce.
Write to Leslie Josephs at leslie.josephs@wsj.com
(END) Dow Jones Newswires
September 28, 2015 16:50 ET (20:50 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
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