Markets suffered yet another fall yesterday, following the
International Monetary Fund's downgrade of global growth estimates
to their lowest level since 2009. Investors also anxiously waited
for the third-quarter earnings season to begin with Alcoa slated to
report its results after the closing bell. The IMF's move came just
a day after the World Bank had reduced growth estimates for East
Asia and the Pacific region. A sell-off in the technology and
service sectors further intensified yesterday's losses.
The Dow Jones Industrial Average (DJI) lost 0.8% to close the
day at 13,473.45. The Standard & Poor 500 (S&P 500) slipped
1.0% to finish yesterday's trading session at 1,441.48. The
tech-laden Nasdaq Composite Index slipped 1.5% to end at 3,065.02.
The fear-gauge CBOE Volatility Index (VIX) was up 8.3% to settle at
16.37. Consolidated volumes on the New York Stock Exchange,
American Stock Exchange and Nasdaq were roughly 5.8 billion shares,
significantly lower than this year's daily average of 6.53 billion
shares. Declining stocks outpaced the advancers on the NYSE; as for
75% stocks that dropped, 22% stocks moved higher.
The Street had a bearish sentiment from the very beginning of
the trading day after the International Monetary Fund (IMF) reduced
its forecast for global economic growth. Apprehensions regarding
policies in the U.S. and Europe had compelled the organization to
reduce global growth estimates. The IMF reduced global growth
estimates for 2012 and 2013 to 3.3% and 3.6% from earlier
projections of 3.5% and 3.9%, respectively. It also said China's
growth may reduce to 7.8% this year. To add to these concerns, the
IMF believes that the risk for a global economic downturn is
"alarmingly high". The IMF noted that the U.S. has a 15% chance of
slipping into a recession in 2013, whereas Japan and the European
region's odds are 25% and 80%, respectively.
This obviously unnerved investors since the announcement came
just a day after the World Bank reduced growth estimates for East
Asia and the Pacific region. The World Bank now forecasts a growth
rate of 7.2% for China and Asia-Pacific countries, down from the
7.6% projected in May this year. Moreover, the World Bank noted
that the slowdown in China would be far worse from what is being
anticipated.
Meanwhile, third-quarter corporate earnings was on the verge of
kicking off with Alcoa Inc. (NYSE:
AA
) reporting results after the closing bell. Benchmarks have enjoyed
a decent rally this year. The future course of the markets depends
a lot on how the earnings season will shape up. However, not many
analysts are upbeat about corporate results this time around.
Bellwether stocks such as FedEx Corporation (NYSE:
FDX
), Caterpillar Inc. (NYSE:
CAT
) and Hewlett-Packard Company (NYSE:
HPQ
) have issued warning about upcoming earnings, indicating weak
demand in Europe and China.
Separately, small business sentiment suffered a fourth
contraction in five months. According to the National Federation of
Independent Business (NIFB), the business sentiment index, rather
the optimism index, reduced by 0.1 point to 92.8. The chief
economist of NIFB, William Dunkelberg, said: "Owners are in
maintenance mode - spending only where necessary and not hiring,
expanding or ordering more inventories until the future becomes
more certain".
Coming to the sectors, technology had a bad run yesterday with
most of the stocks ending in the red. The fall in the technology
sector also pulled the tech-laden Nasdaq index lower. Stocks such
as Intel Corporation (NASDAQ:
INTC
), NVIDIA Corporation (NASDAQ:
NVDA
), Texas Instruments Incorporated (NASDAQ:
TXN
), Hewlett-Packard Company (NYSE:
HPQ
) and Atmel Corporation (NASDAQ:
ATML
) lost 2.7%, 2.1%, 2.4%, 0.6% and 1.6% respectively.
The Consumer Discretionary SPDR (XLY) was a heavy loser
yesterday. Comcast Corporation (NASDAQ:
CMCSA
) lost 2.5% and other stocks such as Time Warner Cable Inc (NYSE:
TWC
), News Corp (NASDAQ:
NWSA
), CBS Corporation (NYSE:
CBS
) and The Walt Disney Company (NYSE:
DIS
) lost 1.1%, 2.0%, 3.7% and 1.6% respectively.
ALCOA INC (AA): Free Stock Analysis Report
ATMEL CORP (ATML): Free Stock Analysis Report
CATERPILLAR INC (CAT): Free Stock Analysis
Report
CBS CORP (CBS): Free Stock Analysis Report
COMCAST CORP A (CMCSA): Free Stock Analysis
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DISNEY WALT (DIS): Free Stock Analysis Report
FEDEX CORP (FDX): Free Stock Analysis Report
HEWLETT PACKARD (HPQ): Free Stock Analysis
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HEWLETT PACKARD (HPQ): Free Stock Analysis
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INTEL CORP (INTC): Free Stock Analysis Report
NVIDIA CORP (NVDA): Free Stock Analysis Report
NEWS CORP INC-A (NWSA): Free Stock Analysis
Report
TIME WARNER CAB (TWC): Free Stock Analysis
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TEXAS INSTRS (TXN): Free Stock Analysis Report
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