Benchmarks were battered after the central bank of Japan made
no additional changes to their previous monetary measures.
Investors had expected Japan's Central Bank to introduce
additional measures to ensure stability in the bond market. Fears
of the Federal Reserve curbing the bond purchase program also
added to investor woes. Meanwhile, the European Commission
suggested a series of "recommendations" to revive Europe's sick
steel industry. Machinery orders in Japan fell for the first time
in the past three months owing to low "capital spending". All the
top ten S&P 500 industry groups suffered losses among which
financial stocks suffered the most.
The Dow Jones Industrial Average (DJI) lost 0.8% to close the
day at 15,122.02. The S&P 500 decreased 1.0% to finish
yesterday's trading session at 1,626.13. The tech-laden Nasdaq
Composite Index declined 1.1% to end at 3,436.95. The fear-gauge
CBOE Volatility Index (VIX) increased 10.6% to settle at 17.07.
Consolidated volumes on the New York Stock Exchange, American
Stock Exchange and Nasdaq were roughly 6.38 billion shares,
marginally above 2013's average of 6.36 billion shares. Declining
stocks outnumbered the advancers. For the 15% that advanced, 83%
In the beginning of 2013, Japan had introduced a stimulus
program of $1.4 trillion because of which Japan was in a position
to achieve growth in the first quarter. In light of recent
volatile trading in the bond markets, investors expected Bank of
Japan to introduce few additional measures to control the
situation. However, no such measures were announced. The Governor
of Bank of Japan, Haruhiko Kuroda, said precautionary steps will
be taken in the future if bond yields "spiked".
Japanese Prime Minister, Shinzō Abe, said the government plans
to implement tax deductions during autumn in an attempt to
encourage capital spending. He added that he would layout the
blue print for a growth strategy after July 21. These
developments dampened investor sentiment, triggering a sell-off
and a free-fall in the stock markets.
Adding to investor woes, fears of the Fed tapering the bond
purchase program dampened investor sentiment. The bond purchase
program has been the very foundation due to which major indices
have touched record highs. However, since Bernanke has made
uncertain statements on slowing of the program, benchmarks have
been on a bumpy road.
On the domestic front, according to the U.S. Department of
Commerce, total inventories, apart from manufacturers' sales
branches and offices for April inched up 0.2% in line with
consensus estimates. Among the categories, inventories for motor
vehicle and motor vehicle parts increased 1.9%. Inventories for
metals and minerals, apart from petroleum declined 1.1%.
Inventories of beer, wine, and distilled alcoholic beverages
On the international front, the European Commission has
provided suggestions on ways of reviving the region's steel
industry. Since 2007 till date, demand has fallen 27% which in
turn adversely affected jobs by 10%. A few steps which the
Commission plans on implementing include scrutinizing the imports
and exports of scrap steel. Scrap steel is mainly included as a
major input for electric arc furnaces. Additionally, the
Commission also proposed EU states should lower the energy
tariffs to increase competition. The commission also called for
utilizing EU funds for the welfare of workers who are unemployed
as a result of closure of steel plants.
According to the data released by the Cabinet Office, Japan's
core machinery orders declined 8.8% in April, compared to
Reuter's estimates of 8.5% and March's increase of 14.2%. These
figures came in after Bank of Japan decided not to introduce
additional monetary measures. Wholesale prices increased 0.6%
while corporate investment declined 0.3% from the last quarter,
marking a fifth consecutive decline. Recently, the economy of
Japan had increased 4.1% on an annualized basis.
All the top ten S&P 500 industry groups suffered losses
among which, financials stocks suffered the most. The Financial
Select Sector SPDR (XLF) lost 1.7%. Stocks such as Bank of
America Corp. (NYSE:
), Goldman Sachs Group, Inc. (NYSE:
), JPMorgan Chase & Co. (NYSE:
), Wells Fargo & Co (NYSE:
) and KeyCorp (NYSE:
) decreased 1.4%, 2.5%, 1.6%, 1.5% and 2.3%, respectively.
BANK OF AMER CP (BAC): Free Stock Analysis
GOLDMAN SACHS (GS): Free Stock Analysis
JPMORGAN CHASE (JPM): Free Stock Analysis
KEYCORP NEW (KEY): Free Stock Analysis Report
WELLS FARGO-NEW (WFC): Free Stock Analysis
To read this article on Zacks.com click here.