US stocks ended with deep losses on Monday, 04 January 2016. Investors dumped risky assets such as equities and piled into havens, bidding up prices of gold and Treasurys following a rout in Chinese shares overnight as well as heightened tensions between Iran and Saudi Arabia that sparked a global equity selloff. The selloff in futures also began with weak economic data concerning manufacturing growth in China. The S&P 500 posted steep losses on Monday, marking it the worst start to a new year in more than a decade.
The Dow Jones Industrial Average closed off session lows, but still recorded a triple-digit loss. The blue-chip index fell 276.09 points, or 1.6%, at 17,148.94. The Nasdaq Composite tumbled by 104.32 points, or 2.1%, to 4,903.09. The S&P 500 fell 31.28 points, or 1.5%, to 2,012.66.
The decline was led by a decline in financials, health-care and consumer discretionary stocks, while all 10 main sectors closed lower. DuPont and J.P.Morgan Chase led the Dow decliners.
There was anxiety in the marketplace to start the trading week and the new trading year on Monday. World stock markets were under selling pressure partly due to rising tensions in the Middle East.
Saudi Arabia on Sunday severed diplomatic ties with Iran, a fellow member of the Organization of the Petroleum Exporting Countries.
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Meantime, there was another downbeat economic report coming out of China that sunk Asian stock markets and has spilled over into weaker European and U.S. equity markets on Monday. China's stock market sank the daily permissible limit and trading was halted. The Shanghai stock index dropped nearly 7% on Monday. China's Caixin manufacturing purchasing managers index (PMI) came in at 48.2 in December from 48.6 in November, for the 10th month in a row with a reading below 50.0. A number below 50.0 suggests contraction in the sector.
In other overnight news, the Euro zone manufacturing PMI came in at 53.2 in December from 52.8 in November. A reading of 53.1 was forecast.
The U.S. manufacturing PMI was also a miss to the downside on Monday, showing a reading of 48.2 in December from 48.6 in November. A reading of 49.0 was expected. The U.S. PMI report did give gold a brief boost to its daily high, but those gains could not be held.
Safe-haven buying amid keener uncertainty in world markets boosted bullion prices on Monday, 04 January 2016. Unrest in the Middle East and weak Chinese economic data worked to lift gold to a three-week high, while putting downside pressure on stock markets worldwide.
February Comex gold ended up $14.60 at $1,074.80 an ounce. March Comex silver ended up $0.067 at $13.87 an ounce.
The precious metals did back down from their daily highs as the trading day progressed. The key outside markets were in a bearish posture for the metals on Monday as the U.S. dollar index moved higher as the day wore on, while crude oil prices posted modest losses.
Crude prices finished lower on Monday, 04 January 2015 at Nymex. Growing tension between Saudi Arabia and Iran fueled volatile trading on Monday, led oil prices ultimately finishing lower as traders worried that an unstable political situation in the Middle East would complicate the outlook for oil in 2016. A strong er dollar also pushed prices lower.
February West Texas Intermediate crude shed 28 cents, or 0.8%, to settle at $36.76 a barrel on the New York Mercantile Exchange. It traded as high as $38.39 and as low as $36.33. February Brent crude settled down 6 cents, or 0.2%, to $37.22 a barrel on London's ICE Futures exchange, reversing course after an earlier high of $38.99.
Today's selloff invited above average participation with more than a billion shares changing hands at the NYSE floor.
Meanwhile in Treasuries, the benchmark note spent the bulk of its day on its high before retreating. The yield on the 10-yr fell three basis points to 2.24%.
Investors will not receive any economic data of note tomorrow.
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