Rising political tension between Russia and the West over
Crimea dragged the benchmarks down to their worst fall in over
five weeks. Lingering concerns about a possible slowdown in China
also impacted the indices. The S&P 500 fell below a technical
level and the year-to-date figure dropped to the red zone. The
Dow suffered its fourth straight decline. Encouraging economic
reports on retail sales and unemployment benefits failed to
prevent the losses.
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Ahead of Wall Street
The Dow Jones Industrial Average (DJI) plunged 1.4% to close
Thursday's trading session at 16,108.89. The Standard & Poor
(S&P 500) fell 1.2% to finish at 1,846.34. The tech-laden
Nasdaq Composite Index declined 1.5% to 4,277.30. The fear-gauge
CBOE Volatility Index (VIX) surged 12.1% to settle at 16.22.
Total volume on the New York Stock Exchange was 3.6 billion
shares. Advancing stocks were outnumbered by declining stocks on
the NYSE. For 32% stocks that advanced, 66% declined.
Benchmarks entered negative territory after the dispute between
Russia and the West flared up once again, dampening investor
sentiment. On Thursday, Russia launched a fresh military exercise
on the borders of Ukraine despite sanctions imposed by the
European Union on Wednesday.
Benchmarks had opened in the green but turned negative after US
President Barack Obama warned Russia to curtail their aggression
over Ukraine. Otherwise, he said, the United States and other
countries will be "forced to apply costs" to Moscow. Obama met
with Ukraine's prime minister at the White House yesterday.
Citizens in Crimea will vote on Sunday to decide whether to stay
with Ukraine or become part of Russia.
Investors' confidence further dipped over growing concerns about
China's economy. Larger-than-expected decline in Chinese exports
of 18.1% year over year in February, reported on Monday, raised
concerns of a slowdown in the world's second-largest economy. The
anxiety further intensified on Thursday after Chinese government
reported year-over-year increases in industrial production, fixed
asset investment and retail sales by 8.6%, 17.9% and 11.8%. The
numbers were short of analysts' expectations of a rise by 9.5%,
19.4% and 13.5%, respectively. Taken together, these
international events unnerved investors and they moved from the
equities to invest in safe-haven assets.
Economic data failed to provide any cheer to the markets. The
U.S. Department of Commerce reported that seasonally adjusted
sales of retail and food services for February rose 0.3% in
February, beating estimates of a 0.2% increase. This rise in
retail sales in February was in sharp contrast to declines of
0.4% in January and 0.1% in December 2013. Retail sales in
the months of January and December were affected due to the harsh
winter weather conditions. However, an improvement in the climate
during the last two weeks of February boosted the sales level.
The Department of Labor reported that seasonally adjusted initial
claims dropped 9,000 to 315,000 in the week ending March 8. This
fall in claims for unemployment benefits in the first week of
March touched the lowest level in more than three months. The
drop was in sharp contrast to the consensus expectation of
initial claims rising to 330,000.
Separately, the U.S. Department of Commerce reported that
business inventories increased 0.4% in January. This was in line
with the consensus estimate.
Nine out of ten sectors of the S&P 500 ended in red. The
Industrial Select Sector SPDR (XLI) and the Health Care Select
Sector SPDR (XLV) led the decline as both the sectors plummeted
1.4%. Top holdings from the Industrial sector such as General
Electric Company (NYSE:
), United Technologies Corp. (NYSE:
), The Boeing Company (NYSE:
), Union Pacific Corporation (NYSE:
) and 3M Company (NYSE:
) decreased 1.6%, 2.5%, 2%, 0.9% and 1.3%, respectively.
Key stocks from the Health care sector such as Johnson &
), Pfizer Inc. (NYSE:
), Merck & Co. Inc. (NYSE:
), Gilead Sciences Inc. (NASDAQ:
) and Amgen Inc. (NASDAQ:
) fell 0.6%, 2.7%, 1%, 2.2% and 1.6%, respectively.