Benchmarks ended lower on Thursday as investors feared
sooner-than-expected rate hikes. Incidentally, the concerns
emerged after the day's mixed economic reports on fourth quarter
GDP and weekly unemployment benefits. Declines in financial and
technology stocks also dragged the markets lower.
Eventually, the S&P 500 fell below the key technical level of
1,850 and the Nasdaq dropped to its lowest point in six weeks.
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Ahead of Wall Street
The Dow Jones Industrial Average (DJI) dropped a meager 0.03% to
close Thursday's trading session at 16,264.23. The Standard &
Poor 500 (S&P 500) was down 0.2% to finish at 1,849.04. The
tech-laden Nasdaq Composite Index finished at 4,151.23, down
0.5%. The fear-gauge CBOE Volatility Index (VIX) fell 2.1% to
settle at 14.62. Total volume on the New York Stock Exchange was
3.7 billion shares. Advancers outran the decliners on the New
York Stock Exchange as for 52% advancers, 45% stocks finished in
According to the "third estimate" by the Bureau of Economic
Analysis, the fourth quarter output of goods and services
produced by labor and property located in the United States
increased at an annual rate of 2.6%. This was lower than the
consensus estimate of 2.7%, but higher than the "second" estimate
that pegged GDP growth at 2.4%.
Separately, the U.S. Department of Labor reported yesterday that
the advance figure for seasonally adjusted initial claims dropped
by 10,000 to 311,000 in the week ending March 22. The drop was in
contrast to the consensus estimate of a rise to 322,000. This
drop in application for unemployment benefits touched the lowest
level in four months.
However, economic data gave rise to concerns that the Federal
Reserve would raise key lending rates sooner than expected.
Earlier, Federal Reserve Chairwoman Janet Yellen had commented
that interest rate hikes might happen in about six months after
the end of the economic stimulus plan. She had said that
the quantitative easing program is expected to end this fall.
The report on pending home sales was also disappointing. The
National Association of Realtors reported that Pending Home Sales
Index, a forward looking indicator based on contract signings,
dipped 0.8% to 93.9 in February. This was in line with consensus
expectation of a drop by 0.8%. Pending Home Sales Index has now
touched its lowest level since October 2011. Low inventory,
declining affordability and harsh winter weather were cited as
the prime factors for the slow growth.
Markets' second-consecutive day of losses was also due to losses
in the financial and technology sectors. The Financial Select
Sector SPDR (XLF) led the decline among the S&P 500 sectors.
The sector fell 0.5%. Citigroup Inc. (NYSE:
) fell the most among the financial stocks as it dropped 5.4%,
its biggest daily decline since Nov 2012. The shares of the
financial behemoth plunged after Federal Reserve rejected the
bank's plea to raise its share buyback program to $6.4 billion
and quarterly dividends to 5 cents.
Other major stocks from the financial sector such as Bank of
America Corporation (NYSE:
), U.S. Bancorp (NYSE:
), American International Group, Inc. (NYSE:
) and MetLife, Inc. (NYSE:
) decreased 0.9%, 1%, 0.6% and 2.3%, respectively.
The Technology Select Sector SPDR (XLK) decreased 0.4%. Key
stocks from the sector such as Apple Inc. (NASDAQ:
), Google Inc. (NASDAQ:
), Microsoft Corporation (NASDAQ:
), International Business Machines Corporation (NYSE:
) and Cisco Systems, Inc. (NASDAQ:
) fell 0.4%, 1.6%, 1.1%, 1.5% and 1.3%, respectively.