Benchmarks suffered their second-worst trading day of the year
after global economic readings dampened investors' sentiment.
Indices were dealt a blow right at the start as data from Europe
and China highlighted difficult economic conditions. Things were
not bright even on the home front; initial claims data was not
sufficiently encouraging and the Federal Reserve Bank of
Philadelphia reported a slump in U.S. mid-Atlantic region
The Dow Jones Industrial Average (DJI) dropped a whopping 250.82
points or 2.0% to end at 12,573.57. The Standard & Poor 500
(S&P 500) plunged 2.2% to close yesterday's trading session at
1,325.51. The tech-laden Nasdaq Composite Index sank 2.4%, by 71.36
points to finish sharply lower at 2,859.09. Investor fears were
also reflected by the fear-gauge CBOE Volatility Index (VIX) as it
soared 16.5% to close at 20.08. Consolidated volumes on the New
York Stock Exchange, the American Stock Exchange and Nasdaq were
roughly 7 billion shares, lower than last year's daily average of
7.84 billion. Decliners outpaced the advancing stocks on the NYSE;
as for every four stocks that declined, only one stock could move
The global economic situation has been beset with many concerns
over the past several months. The euro-zone has been a constant
bother with its lingering debt woes and China has often released
disappointing data that reflects the sorry state of its economy.
Economic readings have been far from encouraging in the U.S. as
well. The combination of these factors is reflected in the flagging
global economy. Such was the case even yesterday, as all these
factors combined to drag benchmarks to their second-worst showing
of the year.
China's manufacturing activity has now plunged to the lowest
level in seven months. The reading on manufacturing purchasing
managers' index (PMI) was released by HSBC, which came in at 48.1
in June, down from 48.4 in May. Anything below 50 suggests a
contraction and such news from world's second-largest economy
significantly affected investor sentiment.
Meanwhile, business activity continued its downslide for the
fifth straight month, intensifying investors' fears. Financial
information and services firm Markit said the private sector had
shrunk in the 17-nation Euro block at its fastest pace in three
years and the contraction had not spared even France and Germany.
Euro Zone's Flash Composite Purchasing Manager's Index was down to
46.0, the ninth such decline in 10 months.
While global data dampened investor sentiment, economic readings
on the home front were also far from encouraging. Seasonally
adjusted initial claims dropped by a mere 2,000 to move to 387,000
in the week ending June 16, from the prior week's revised figure of
389,000. The decline even failed to beat consensus expectations,
which had predicted a decline to 383, 000.
More bad news greeted investors when the Philadelphia Fed
released data on U.S. mid-Atlantic region's manufacturing activity
later during the day. The Business Outlook Survey noted that
'general activity, new orders, shipments, and average work hours
were all negative this month, suggesting overall declines in
business'. Coming to the reading itself, in its report the
Philadelphia Fed said: "The survey's broadest measure of
manufacturing conditions, the diffusion index of current activity,
fell from a reading of ‐5.8 in May to ‐16.6, its second consecutive
negative reading". The drop to a negative 16.6 was also
contradicted consensus expectations of an increase to 1.4.
Amidst these negatives, he U.S. crude prices moved down to their
lowest level in almost nine months, slumping to $78.20 per barrel.
Energy Select Sector SPDR (XLE) and energy stocks including Chevron
), ConocoPhillips (NYSE:
), Marathon Petroleum Corp (NYSE:
), Marathon Oil Corporation (NYSE:
), Occidental Petroleum Corporation (NYSE:
) and Transocean Ltd. (NYSE:
) slumped 3.5%, 3.1%, 3.4%, 5.6%, 6.1% and 6.2%, respectively.
CONOCOPHILLIPS (COP): Free Stock Analysis
CHEVRON CORP (CVX): Free Stock Analysis Report
MARATHON PETROL (MPC): Free Stock Analysis
MARATHON OIL CP (MRO): Free Stock Analysis
OCCIDENTAL PET (OXY): Free Stock Analysis
TRANSOCEAN LTD (RIG): Free Stock Analysis
To read this article on Zacks.com click here.