Fears of a global financial slowdown, sparked off by worrying
news from Europe and China, battered the markets down on Friday
resulting in the benchmarks' worst week this year. None of the 10
industry groups of S&P 500 could muster a finish in the green,
and the index suffered its first set of consecutive declines since
November last year.
The Dow Jones Industrial Average (DJI) plunged 1.2% to settle at
12,849.59. The Standard & Poor 500 (S&P 500) slumped 1.3%
to finish Friday's trading session at 1,370.26. The tech-laden
Nasdaq Composite Index crashed to 3,011.33, after losing 1.5%. The
fear-gauge CBOE Volatility Index (VIX) soared 13.7% to close at
19.55. Consolidated volumes on the New York Stock Exchange, the
American Stock Exchange and Nasdaq remained low at roughly 6.07
billion shares, compared with last year's daily average of 7.84
billion. Decliners outpaced the advancing stocks on the NYSE; as
for 74% of stocks that ended in the red, only 23% stocks climbed
higher. The remaining 3% stocks were left unchanged.
On Friday, the Dow registered its third triple-digit loss for
the week and the index ended up in the negative zone. For the other
benchmarks too, it was a week that they would like to forget.
During the week, the benchmarks recorded their worst performance of
the year, and their declines on Tuesday were not only the largest
in percentage terms, but were also in terms of points. A bounce
back over the next two days, including robust gains on Thursday,
could hardly negate the strong losses and the benchmarks ended up
suffering their worst week for the year. The Dow, S&P 500 and
Nasdaq plunged 1.6%, 2.0% and 2.3%, respectively, for the week.
Not only were the benchmarks busy setting dismal records, but
the fear-gauge index too had its fair share of misfortune. The VIX
ended in positive territory for the fourth-consecutive week,
recording the longest period of gains since August. Starting
January till end of March this year, the VIX had plunged 32.5%, but
it seems that the VIX reversed this trend over the past few weeks.
In April alone, the VIX soared 26.1% and the one month change is a
positive 35.1%. The VIX reflects the markets' mood and an uptrend
reflects increasing fears and apprehensions about the economy. The
VIX has taken a cue from global concerns, which have been dampening
sentiment over the past couple of weeks. Borrowing costs in Europe
are trending up and China has also sparked off concerns because of
weak economic data.
On Friday, similar concerns dampened sentiment, as Italy and
Spain once again reported inflating borrowing costs. According to a
report, industrial output in Italy had shrunk 0.7% in February.
These concerns impacted the nation's 10-year bond yields, which
climbed 0.06% to 5.43%. Separately, as Spain's borrowing from
European Central Bank (ECB) reached the highest level and Spanish
10-year bond yields moved up to 5.86%.
Separately, China reported the slowest economic growth in 11
quarters. The National Bureau of Statistics reported that the
country's gross domestic product (
) expanded at 8.3% rate, the slowest quarter growth since global
meltdown. The pace of growth also slowed from the 8.9% pace of
growth in the previous quarter.
Such dismal news from the world's second-largest economy
combined with the surging concerns on the European front had
investors concerned. Adding to these fears, economic data on the
home front further dampened the mood. The University of
Michigan/Thomson Reuters preliminary reading of consumer sentiment
reported that the index had dropped to 75.7 In April from 76.2 in
March. The reading not only showed a downtrend, but the drop was
also below consensus estimates of 76.3.
Separately, the U.S. Bureau of Labor Statistics released its
data on the Consumer Price Index (
), which also provided little to cheer about. The report noted that
on a seasonally adjusted basis the Consumer Price Index for All
Urban Consumers (CPI-U) was up 0.3%, as against the 0.4% rise in
February. The report elaborated: "The gasoline index continued to
rise, more than offsetting a decline in the household energy index
and leading to a 0.9 percent increase in the energy index. The food
index rose 0.2 percent as the index for meats, poultry, fish, and
eggs increased notably," and added, "The index for all items less
food and energy rose 0.2 percent in March after increasing 0.1
percent in February".
Coming to sectoral stocks, the financial sector incurred heavy
losses and the Financial Select Sector SPDR (
) dropped 2.3%. As for financial stocks American Express Company
), Bank of America Corporation (NYSE:
), Citigroup, Inc. (NYSE:
), JPMorgan Chase & Co. (NYSE:
), The Goldman Sachs Group, Inc. (NYSE:
), Morgan Stanley (NYSE:
) and Wells Fargo & Company (NYSE:
) declined by 1.3%, 5.3%, 3.5%, 3.6%, 4.4%, 5.2% and 3.5%,
AMER EXPRESS CO (
): Free Stock Analysis Report
BANK OF AMER CP (
): Free Stock Analysis Report
CITIGROUP INC (C): Free Stock Analysis Report
GOLDMAN SACHS (GS): Free Stock Analysis Report
JPMORGAN CHASE (JPM): Free Stock Analysis
MORGAN STANLEY (MS): Free Stock Analysis Report
WELLS FARGO-NEW (WFC): Free Stock Analysis
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