Strong US market rally evaporates as China fears re-emerge

By Sarah McDonald

SP_stock_market(Bloomberg) — U.S. index futures slid after a stock rebound evaporated in trade toward the end of Tuesday in New York, dashing hopes that China’s interest-rate cut would put a floor under shares in the world’s biggest equity market.

Contracts on the Standard & Poor’s 500 Index lost as much as 0.9 percent as of 9 a.m. in Sydney Wednesday, before paring the drop to 0.4 percent. The U.S. equity benchmark ended the previous day 1.4 percent lower, erasing a 2.9 percent advance in the biggest reversal of a rally since 2008. Nasdaq 100 Index futures slid 0.6 percent, while those on the Dow Jones Industrial Average retreated 0.4 percent.

“Investors are going to be keeping a keen eye on the Asian markets overnight and how they react to the rate cut,” said Walter “Bucky” Hellwig, who helps manage $17 billion as a senior vice president at BB&T Wealth Management in Birmingham, Alabama. “The weak last hour in the market wasn’t a good sign. There wasn’t a lot of buying to carry the rally.”

After the Shanghai Composite Index fell 7.6 percent Tuesday to cap a 22 percent, four-day plunge, China’s policy makers cut interest rates for the fifth time since November and lowered the amount of cash banks must set aside. While Chinese equity-index futures surged, with contracts on the FTSE China A50 Index jumping 4.9 percent, exchange-traded funds tracking the nation’s equities almost erased rallies in New York.

At its current level, down 9.3 percent on the year to 1,867.61, the S&P 500 is 1 percent away from erasing its gains since the end of 2013. It’s also about 5 points above the lowest level of its last big tumble, the 1,862.49 reached Oct. 15. The measure has lost 11 percent in five days, the fiercest bout of selling since the U.S. was stripped of its AAA credit rating by S&P in August 2011.

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