U.S. stocks drop as Turkey's lira plunges to new low

NEW YORK, U.S. - The financial crisis in Turkey, which sent its currency lira plummeting last week, continued to rattle investors globally and dragged down Wall Street on Monday. 

At the close in NYSE, U.S. stocks were lower, owing to losses by Oil & Gas, Basic Materials and Financials sectors, that pulled shares lower.

With the lira hitting a record low hurting investor sentiment around the world, the S&P 500 and the Dow fell for the fourth session in a row.

On Monday, the Dow Jones Industrial Average fell 125.44 points or 0.5 percent, to close at 25,187.70 - in its fourth strategy day of losses, which is its longest losing streak since June.

Meanwhile, recording its first four-day losing streak since March, S&P 500 declined 11.35 points or 0.40 percent, to 2,821.93.

With Amazon and Apple rising 1 percent, it kept the losses made by the Nasdaq Composite in check, which fell 0.25 percent to 7,819.71.

Apple Inc continued its post-earnings rally, with its shares hitting an all-time high, finishing the day 0.65 percent or 1.34 points higher. 

And Amazon.com hit $1,925 per share, reaching a record level after its stock closed 0.5 percent higher.

Merck & Company Inc rose 1.00 percent or 0.66 points to trade at 66.73 at the close.

Visa Inc was also up 0.34 percent or 0.48 points to 140.21 in late trade.

DowDuPont Inc, Goldman Sachs, J.P. Morgan Chase, and International Business Machines recorded more than 1 percent drop. 

Meanwhile, the CBOE Volatility Index, which is a measure of investors' expectations for swings in the S&P 500 over the next 30 days or better known as Wall Street’s fear gauge for the third straight session, 12.16 percent to 14.76 - its highest in more than a month.

According to Thomson Reuters I/B/E/S with the second-quarter earnings season approaching the finish line, of the 455 companies in the S&P 500 that have reported so far, 79 percent have beaten analysts' estimates.

Turkey contagion fears mainly hit financial stocks, with shares of Citigroup Inc, Bank of America Corp, Wells Fargo & Co and JPMorgan Chase & Co closing down between 0.8 percent and 2.2 percent.

Lowered by Moscai’s 3.6 percent drop, Materials recorded a 1 percent decline.

With U.S. crude hitting a seven-week low, energy shares fell 1.2 percent.

After briefly dropping over 20 percent on Friday, the Turkish lira reached a fresh record low before regaining some footing on Monday.

With inflation reaching 16 percent last month - well above the central bank's 5 percent target - the Turkish economy has been reeling.

So far this year, the currency has dropped 40 percent against the dollar and even though Turkey's central bank vowed to stabilize the country’s plummeting currency, it failed to calm investors' nerves. 

Gary Bradshaw, portfolio manager of Hodges Funds in Dallas said in a note, "The market's all about Turkey and the continuation of the trade issues out there. The market definitely wants to go higher but we're having some curves thrown at us along the way that have caused a few day-to-day pull-backs."

Jennifer Ellison, principal at BOS explained, "Investors are generally going to be more cautious with a story like Turkey out there. It's going to hold people off from taking significant risk for a short period of time ... but if you take a step back and look at the bigger picture, things are good."

Referring to the souring ties between the U.S. and Turkey, Larry Benedict, CEO of The Opportunistic Trader, said the move is being felt across the globe. 

Benedict explained, "Markets across the board going from China all through Europe were lower.”