Stocks fall lower as Turkey crisis looms

U.S. stocks were lower Monday but the contagion from the economic crisis in Turkey remained largely confined to emerging-market assets. The dollar surged to its highest in 14 months, punishing commodities from crude to metals.

The S&P 500 Index declined for a fourth straight day, its longest losing streak in five months, due to weakness in energy, materials and financial firms. Turkey’s lira sank for a fourth day, hitting a new low. Emerging-market equities tumbled more than 2 percent and currencies dropped 1 percent, with South Africa’s rand falling to the lowest since June 2016. European banks dragged down stocks in the region, though equity measures closed well above the day’s lows.

The economic troubles in Turkey gripped global financial markets, with investors scrambling to determine whether and how far pain there would spread. Early signs that markets would buckle faded during the American trading day as stocks swung between gains and losses, though declines in developed-nation assets remained deep.

“The fact that the early day rally faded has spooked investors that Turkey risk is still increasing toward a bigger event,” said Jim Paulsen, chief investment strategist at Leuthold Weeden Capital Management. “Contagion risk is the primary driver today.”

Investors started the week after Turkey’s President Recep Tayyip Erdogan maintained his defiance toward both the U.S. and financialmarket orthodoxy in speeches on Sunday, heightening concern that the financial woes there would spread to other markets. Central bank moves to boost liquidity provided little relief.

“The efforts of regulators on the European continent and in the U.K. over the last eight-plus years to fortify their respective banks (via improved regulation and government administered ‘stress tests’) will likely mitigate damage — should it occur — and prevent development of systemic risk or contagion from spreading,” Oppenheimer & Co. strategists led by John Stoltzfus wrote in a note to clients Monday.