Weaker-than-expected domestic manufacturing data hammered
benchmarks yesterday and the markets witnessed their worst
selloff in many months. Nine of S&P 500's industry groups
slumped, with this index along with the Dow suffering their worst
declines since June 20. Nasdaq had its biggest single-day decline
since June 1. The decline on the first trading session of
February came right after benchmarks had suffered in January
their worst monthly performance in over a year.
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Ahead of Wall Street
The Dow Jones Industrial Average (DJI) slumped 326 points, or
2.1%, to 15,372.80. The Standard & Poor 500's lost 2.3% to
end sharply lower at 1,741.89. The tech-laden Nasdaq Composite
Index plunged almost 107 points, or 2.6%, and closed at 3,996.96.
The fear-gauge CBOE Volatility Index (VIX) soared 16.5% to settle
at 21.44. The decline was also a result of heavy volumes as
roughly 9.46 billion shares changed hands on the domestic
exchanges, higher than January's average of 6.94 billion. The
decliners on the NYSE far outpaced the advancing stocks; as for
83% stocks that lost, only 15% could finish in the green.
Benchmarks' heavy fall yesterday took them below key technical
levels. The S&P 500 is now trading below the significant
resistance level of 1,775. It hit its lowest level since Oct 17.
Moreover, it has now lost 5.8% since hitting a high of 1,848.38
on Jan 15.
The Dow is hovering below its 200-day moving average and
yesterday's triple-digit decline was the seventh such instance
this year. It was the first time since Dec 28, 2012 that the Dow
closed below its 200-day moving average. The Nasdaq saw the
biggest single-day selloff since Jun 1 last year.
The dismal manufacturing growth was largely blamed for the
beating the benchmarks took yesterday. The Institute for Supply
management reported its January PMI had dropped 5.2 percentage
points from December's adjusted reading of 56.5% to 51.2%. The
drop to 52.1% in January was in sharp contrast to economists'
expectation of an increase to 56.1%. The ISM Manufacturing Index
is based on surveys of 300 purchasing managers nationwide
representing 20 industries regarding manufacturing activity. A
drop in such a key index of the world's largest economy unnerved
Separately, the New Orders Index declined 13.2% from December to
51.2% in January. The Production Index stood at 54.8%, plunging
6.9 percentage points from December's seasonally adjusted reading
This dismal data further intensified other concerns that the
markets are dealing with. Through January, and largely during the
second half, markets were witness to concerns from China and
emerging markets. While China's manufacturing sector showed a
contraction, emerging market currencies suffered their worst
selloff in five years. On top of this, the Federal Reserve's
decision of another $10 billion cut to the economic stimulus plan
dealt a severe blow to the markets.
For January, the blue-chip index plunged 5.3%, S&P 500 was
down 3.6% and Nasdaq ended the month with 1.7% decline. This was
the blue-chip index' worst start since 2009. The S&P 500's
monthly decline was the worst start to a year since 2010.
Coming back to yesterday's events, consumer discretionary and
industrial sectors were among the biggest losers. The Consumer
Discretionary Select Sector SPDR (XLY) was down 2.6% and stocks
such as Amazon.com Inc. (NASDAQ:
), Comcast Corporation (NASDAQ:
), The Walt Disney Company (NYSE:
) and The Home Depot, Inc. (NYSE:
) dropped 3.5%, 3.1%, 3.6% and 2.3%, respectively.
The Industrial Select Sector SPDR (XLI) was down 2.8% and key
stocks including General Electric Company (NYSE:
) (3.1%), United Technologies Corp. (NYSE:
) The Boeing Company (NYSE:
) and 3M Company (NYSE:
) declined 3.1%, 3.4%, 1.7% and 3.4%, respectively.