U.S. stocks drop in midday trading on China growth worries

The Nasdaq composite was little changed at 4,544. Wall Street looked set for gains, with futures for the Dow Jones industrial average and the Standard & Poor’s 500 up 0.3 percent.

The Fed held off from raising interest rates at its meeting earlier this month, citing worries about the global economy, particularly China. Amid the turmoil, the Fed has been ramping up its rhetoric in favor of a 2015 rate hike, a move that will likely hit demand for emerging-market investments as their economies struggle. The steepest profits drop since 2011 added to concerns about the economic slowdown under way in China and sent share markets tumbling. The 8.8 percent profit fell according to CNBC, together with China’s Caixin Purchasing Managers’ Index that will be released on Thursday sparks fear among investors causing a strong sell-off in the early trade.

With China’s demand for resources waning and prices sitting at multi-year lows, commodities-linked firms took a hit.

THE QUOTE: “Investors are bailing out of resource stocks following further pressure on London-listed commodity house Glencore”, said Michael McCarthy, chief strategist at CMC Markets in Sydney.

The worldwide Monetary Fund might lower its outlook for this year’s global economic growth from 3.3%, Managing Director Christine Lagarde hinted to a French newspaper. China’s biggest coal producer, fell 5.3%.

The dollar index slipped about 0.2% to 95.816, extending the previous session’s 0.4% drop.

The South Korean won fell 0.58% against the United States unit, the Thai baht shed 0.19% and Indonesia’s rupiah was 0.26% lower.

The euro also weakened, to $1.1168 from $1.1202 in New York.

Global stocks slid to lows not seen in more than two years as raw materials prices and emerging markets remained under pressure. “That is weighing on the dollar, while the yen and the franc are trading higher”. Federal Reserve Bank of New York President William Dudley said in an interview with The Wall Street Journal on Monday that he expects policymakers will raise rates this year. China-related issues, such as robot maker Fanuc, automaker Honda and construction machinery manufacturer Komatsu, suffered hefty losses.

The decline, following a 1% plus fall on Monday, left the index at the lowest closing level seen since January 16 this year. Among them were trading houses Mitsui, Mitsubishi and Sumitomo, as well as oil companies JX Holdings, Idemitsu Kosan and Showa Shell.

The surprise devaluation of China’s currency in August, after weeks of roller-coaster stock-market performance, raised the possibility that a slowdown in the world’s No. 2 economy may be deeper than official data reveals, with a fresh reading on the factory activity due Thursday. Mitsui O.S.K. said it plans to post about a Y25 billion ($209.4 million) special loss in an earnings report due October. 30. Trading of its shares was halted for Tuesday. The measure is headed for its worst monthly loss since May 2012 and its biggest quarterly decline since 2010.

Many market players believe that the key to ending this downward spiral is structural reforms by China, the source of the current woes. Similar maturity Australian debt yielded 2.62 per cent, down seven basis points.