Dow Jones Industrial Average Craters 276 Points as Chinese Stocks Crash

Money Morning Contributor

For Jan. 4, 2016, here’s the top stock market news and stocks to watch based on today’s market moves…

How Did the Stock Market Do Today?

Dow Jones Industrial Average
Dow Jones:
17,148.94; -276.09; -1.58%

S&P 500: 2,012.66; -31.28; -1.53%

Nasdaq: 4,903.09; -104.32; -2.08%

The Dow Jones Industrial Average today (Monday) fell more than 450 points in mid-morning hours before cutting losses and finishing down 276 points on the day. The downturn was the worst first day of trading to kick off a year since 1932, an ominous sign for investors.

Why did the Dow Jones Industrial Average face such a huge rout? Blame China. This morning, mainland Chinese stocks cratered nearly 7% before trading was suspended. Global markets remained on alert after Chinese factory activity fell for the 10th consecutive month, renewing concerns about the world’s second-largest economy and whether its massive stimulus efforts and currency manipulation are enough to facilitate export and domestic demand.

Top Stock Market News Today

  • Stock Market Today: All 10 S&P sectors were negative today, with healthcare and financial stocks leading the downturn. Shares of com Inc. (Nasdaq: AMZN) and Paypal Holdings Inc. (Nasdaq: PYPL) fell 6.3% and 4%, respectively, after the companies received downgrades from brokerage firm Monness, Crespi, Hardt & Co. Meanwhile, shares of Netflix Inc. (Nasdaq: NFLX) were off 3.9% after a downgrade from Baird Capital. Finally, Apple Inc. (Nasdaq: AAPL) saw shares gain 0.1% despite concerns about iPhone sales in China.
  • I’m Loving It: It was a busy day for fast food stocks following a round of upgrades and downgrades in the sector. Shares of McDonald’s Corp. (NYSE: MCD) were off 0.5% today despite receiving a “Buy” rating from both Bank of America Corp. (NYSE: BAC) and Nomura Group, a Japanese financial firm. Nomura also upgraded shares of Wendys Co. (Nasdaq: WEN) on an improved sales outlook. Today’s biggest loser in the sector was Chipotle Mexican Grill Inc. (NYSE: CMG), which saw shares decline more than 6.4% after the stock was downgraded by Oppenheimer on concerns about its two-year earnings outlook.
  • Oil Gains: Oil prices pared gains and turned negative after rising almost 4% as tensions between Saudi Arabia and Iran threaten to extend the downturn after the former executed Shiite cleric Sheikh Nimr al-Nimr. Iranian protestors stormed the Saudi Embassy in Tehran and the markets reacted on rising geopolitical tensions that could signal intense fallout across the Middle East. February’s WTI prices were off 0.8% at $36.76 per barrel. Meanwhile, Brent oil crude – priced in London – fell 0.2% to hit $37.22. The sector’s most active traders today were Exxon Mobil Corp. (NYSE: XOM) and Chevron Corp. (NYSE: CVX), which fell 0.6% and 1.2% on the day, respectively.
  • On Tap Tomorrow: On Tuesday, the markets will react to a light earnings report and a light economic calendar. Keep an eye on automotive stocks as the December Motor Vehicle Sales report drops in the morning hours. Companies set to report quarterly earnings include Sonic Corp. (Nasdaq: SONC), Commercial Metals Co. (NYSE: CMC), AEP Industries (Nadsaq: AEPI), Landec Corp. (Nasdaq: LNDC), and SUPERVALU Inc. (NYSE: SVU).

Stocks to Watch: GM, AXP, BAC, USB, V, COST, BXLT, SHPG, LVS, WYNN, BABA, YHOO

  • Stocks to Watch No. 1, GM: Automotive giant General Motors Co. (NYSE: GM) has invested $500 million into ride-sharing giant Lyft Inc. The company joined Saudi Arabia’s Kingdom Holding Co., Janus Capital Management, and Japanese e-commerce firm Rakuten Inc. as the latest investors in a round that values Lyft at $5.5 billion. GM expects ride-sharing services will offer a big boost to the autonomous automotive industry of the future. GM shares were off 2.1% on the day.
  • Stocks to Watch No. 2, AXP: Shares of American Express Co. (NYSE: AXP) slumped 2.8% on news that Fidelity Investments has reduced its 12-year relationship with the credit card company, a partnership that had generated billions in revenue. Fidelity also has cut ties with Bank of America Corp. (NYSE: BAC) and added partners in S. Bancorp (NYSE: USB) and Visa Inc. (NYSE: V). The decision is the latest blow to American Express, which is still reeling after it lost its partnership with retailer Costco Wholesale Corp. (Nasdaq: COST). Shares of AXP stock are off roughly 25% in the last year.
  • Stocks to Watch No. 3, BXLT: Shares of Baxalta Inc. (NYSE: BXLT) were up more than 5.5% after the company received a larger offer from UK drug maker Shire Plc. (Nasdaq ADR: SHPG). The previous all-cash offer of $46.50 has been boosted to $48 per share in a mix of stock and cash, according to Bloomberg.
  • Stocks to Watch No. 4, LVS: Shares of Las Vegas Sands Corp. (NYSE: LVS) and Wynn Resorts Ltd. (Nasdaq: WYNN) were both off 1% and 0.6%, respectively, on negative news from the Chinese casino industry. According to the latest revenue figures from casino operators in Macau, gambling revenue slumped 34.3% in the Chinese territory in 2015.
  • Stocks to Watch No 5, BABA: Shares of Alibaba Group Holding Ltd. (NYSE: BABA) were off 5.6% due to the China stock rout today. The downturn in the e-commerce giant’s stock also sunk Yahoo! Inc. (Nasdaq: YHOO), which slid 5.6% on the day. Yahoo still maintains a large stake in Alibaba stock.

What Investors Must Know This Week

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