Biotech, Commodities Lead Dow Retreat
New York — U.S. stocks fell Friday, with the Dow Jones industrial average posting its worst week since January, as biotechnology shares slumped and raw-material producers sank amid fresh signs of a slowdown in China.
Biogen lost 22 percent after cutting its 2015 earnings forecast. Raw-material and energy shares in the Standard & Poor’s 500 index fell at least 1.9 percent. Amazon surged 9.8 percent, while Visa Inc. gained 4.3 percent after profits beat predictions. An index of homebuilders decreased 2.6 percent after new-home sales unexpectedly dropped.
The S&P 500 dropped 1.1 percent to 2,079.65, and marked its biggest weekly loss in four months. The Dow Jones industrial average declined 163.39 points, or 0.9 percent to 17,568.53, and fell 2.9 percent on the week. The Nasdaq composite index decreased 1.1 percent to complete its worst week since March after closing at a record Monday.
“Certainly the ongoing collapse in commodity prices emanating from weak data in China and weak earnings reports from companies because of China, such as Caterpillar, are weighing on the market,” said Jim Paulsen, the Minneapolis-based chief investment strategist at Wells Capital Management. His firm oversees $351 billion. “We’ve got a pretty big collapse going on here.”
A private gauge of Chinese manufacturing unexpectedly fell to the lowest in 15 months, reinforcing the need for further policy support in an economy that had seen signs of stabilization recently.
A separate report showed sales of new homes in the U.S. dropped to a seven-month low, surprising economists who forecast a gain and painting a picture of less robust improvement during the industry’s busiest time of year.
The S&P 500 lost 2.2 percent last week, its worst since March and the fourth weekly decline out of five, after briefly rising Monday above the all-time closing high. The gauge is 2.4 percent away from its May record, after sliding as much as 4 percent from the high as concerns about Greece’s debt crisis and China’s stock market rout weighed on sentiment.
Investors are also watching economic reports for clues on when the Federal Reserve will start raising interest rates. Along with the housing data, a separate report Friday said a July gauge of U.S. manufacturing improved slightly from the weakest reading since October 2013.
Economists surveyed by Bloomberg continued to put the odds for a September rate increase at 50 percent, even after Greece and China temporarily rocked markets. Fed policy makers gather for a two-day meeting on Tuesday and Wednesday this week.
Meanwhile, earnings season has been spotty so far, with sluggish demand overseas damping returns for U.S. multinational companies at the same time the dollar has strengthened to near the highest level since April.
From Apple to Caterpillar and Microsoft, a parade of blue chips have disappointed investors in the past two weeks.
The impact has been the most pronounced on the Dow, which had its worst week since January. Analysts now call for a 4 percent drop in second-quarter profit for the equity gauge’s members, shallower than July 17 estimates for a 5.3 percent decline.
The Chicago Board Options Exchange Volatility Index rose 8.7 percent Friday to 13.74. The gauge rose 15 percent for the week after it tumbled 29 percent last week, the biggest such slide since January. About 7.3 billion shares traded hands on U.S. exchanges, 14 percent above the three-month average.
Nine of the S&P 500’s 10 main groups retreated, led by raw materials, energy and health care shares. Biogen plummeted 22 percent, the biggest drop in almost seven years, after the biotech company lowered its forecast for 2015 profit and sales, revising expectations for growth as its top-selling multiple sclerosis drug faces competition.
The Nasdaq biotechnology index fell 4 percent, the most since April 27. Gilead Sciences and Celgene declined at least 2.9 percent, while Vertex Pharmaceuticals lost 4.1 percent.
Raw-material stocks in the index slipped 2.2 percent. A gauge of commodities dropped 1.1 percent to its lowest level since Jan. 29. Freeport-McMoRan, the copper miner that bet big on the energy market two years ago, fell 9.9 percent to its lowest since January 2009 after it failed to offer investors a plan to withstand plunging prices for almost everything it produces.
Dow Chemical sank to a more than five-month low, down 3.8 percent and falling for a sixth day, the longest losing streak in a year. DuPont decreased 2.6 percent to its lowest in nearly 18 months.
Energy companies in the benchmark index tumbled 2 percent, as crude oil fell for a third day. The resource, which fell more than 5 percent for the week, is back in a bear market. Chevron declined 2.5 percent to its lowest since Oct. 2011. Exxon Mobil fell 1.5 percent.
“We’re seeing commodities and energy sink very low, and you’re seeing profit-taking in some high-multiple health-care names,” said Tim Ghriskey, who helps oversee $1.5 billion as managing director and chief investment officer at Solaris Asset Management. “There’s a bit of fear there’s going to be more to this selloff. The Chinese PMI showed an even worse contraction in China, and that’s also having a negative effect.”
Capital One dropped 13 percent, the most in more than six years, after reporting a profit that missed analysts’ estimates as the lender set aside $1.1 billion to cover credit losses. American Express posted its biggest two-day slide in three months, losing 1.4 percent on top of a 2.5 percent retreat Thursday after its quarterly results disappointed.