A specialist works at his post on the floor of the New York Stock Exchange.(Photo: Richard Drew, AP)
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The Dow Jones industrial average and the Standard and Poor's 500 stock index took modest losses, both for the day and the month, sealing September's reputation as a rotten month for stocks.
The Dow closed down 28.29 points, or 0.17%, and the S&P 500 closed down 5.49 points, or 0.28%. The Nasdaq composite shed 0.28%. For the month, the S&P 500 finished down about 1%.
The indexes started the trading day higher before nosing into the red, then climbing back into positive territory . . . only to waver again. News that home prices rose at their slowest pace since 2012 and that consumer confidence fell sharply also gave investors something to consider on the domestic front.
So, how will the Hong Kong drama pan out? Rod Smyth of Riverfront Investment Group says investors should keep in mind three scenarios: the protests peter out, a Tiananmen Square-like confrontation or continued protests amid a Chinese crackdown on Hong Kong's relative freedoms.
The last possibility is, thankfully, a long shot, Smyth said.
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"Come on, let's be realistic, are they really going to jeopardize 100 years of trading (with Hong Kong)?" Smyth asks of China. "Probably not."
Said Quincy Krosby of Prudential Financial: "What the market does not want to see is this spreading to other Asian countries. The fear is this morphs into the Asian version of the 'Arab Spring,' and creates great uncertainty."
Look for the symbiotic relationship between China and Hong Kong's business interests to prevail and quiet the protests, said Sung Won Sohn, an economics and finance professor at California State University.
"China remains in firm control," Sohn said. "Businesses don't want to antagonize the Chinese government. I don't think it will be a big problem."
A heavy-handed response is "extremely unlikely," said Edmund Harris, a portfolio manager of several Asia-focused funds at Guinness Atkinson. Short of that, the impact on companies -- those in China, elsewhere in Asia or in the U.S. -- will be minimal, he said.
But a Chinese crackdown "would signal the end of the one country-two systems concept agreed at the handover in 1997" -- and greatly chill investment in China, he said.
Lu Yu, manager of the Allianz GI Emerging Markets Opportunity Fund, agreed that a harsh responseto the protests would not be in the best interest of China's economy or investors.
"As long as the Chinese government doesn't do a stupid thing like Tiananmen Square in 1989 this will be a non-issue for China," she said.
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Another market pro doesn't think the Hong Kong protests will have a lasting impact.
"We don't think this protest will lead to any political changes in Hong Kong," said Lu Yu, an emerging markets portfolio manager at San Diego-based Allianz Global Investors.
"Today's Hong Kong is not yesterday's Hong Kong," she said. "Their economy relies so much on mainland China."
She added, "Once students and people go back to work next week, I expect the protest to cool down. I actually think we should use this selloff to buy good alpha Chinese names."
The Hang Sang declined 1.4% after shedding around 2% on Monday. Protest leaders set a Wednesday deadline for a response from the government to their demands for democratic reforms.
On Monday, the Dow lost 0.2%, Standard & Poor's 500 index ended down 0.3% and Nasdaq composite slipped 0.1%. Earlier in that trading session markets fell sharply before recovering slightly.
The street protests caught Wall Street by surprise, causing uncertainty to spike and continuing the U.S. stock market's recent run of sharp up-and-down price movements. The Hong Kong markets are closed for the next two days because of holidays.
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