Investors worry about European banks
U.S. stocks closed lower on Thursday, 29 September 2016 recovering from session lows, following a selloff fueled by investor worry about European banks and talk of a December rate increase by the Federal Reserve. Investors were following embattled giant German lender Deutsche Bank, which has been buffeted by concerns about the health of its balance sheet, specifically its ability to withstand a potential $14 billion fine from the U.S. Justice Department.
The Dow Jones Industrial Average closed down 195.79 points, or 1.1%, at 18,143.45, with the largest decliners being Goldman Sachs Group and Merck & Co. both shedding more than 2%. Earlier, the average was down by as many as 248 points. The Nasdaq Composite Index overcame an earlier 64-point deficit and finished down 49.39 points, or 0.9%, at 5,269.15. The S&P 500 index dropped 20.24 points, or 0.9%, to close at 2,151.13, with all the index's sectors finishing lower, led by declines in health-care, financial, and utilities shares. Earlier, the index was down by as many as 26 points.
By afternoon trading, focus shifted to European banks, following a report that a handful of derivatives-clearing clients had withdrawn excess cash from Deutsche Bank. Deutsche Bank's U.S.-listed shares closed down 6.7%. Doubleline Capital founder Jeffrey Gundlach added further pressure on Thursday warned investors to keep clear of Deutsche Bank shares and remain defensive in financial markets.
Markets rallied across Asia and Europe and the dollar trimmed gains against Japanese yen as stocks sold off. The yen is traditionally viewed as place to hide when investors fear economic or global uncertainty.
The ICE U.S. Dollar Index was up 0.2% as markets looked to recent and upcoming commentary from Federal Reserve officials for clues on the pace of interest-rate increases. Higher interest rates can boost the dollar and dull demand for dollar-denominated commodities.
Economic data at Wall Street showed that initial jobless claims rose 3,000 to 254,000 in late September, but remained below 300,000 for 82 straight weeks, pointing to a steadily improving labor market. Meanwhile, revised data suggest that the economy's performance in the spring was slightly better than expected, as business investment wasn't nearly as weak as previously reported. The gross domestic product grew a 1.4% pace in the second quarter.
On Thursday, Philadelphia Fed President Patrick Harker said he backs a December rate increase if the economy continues to grow as expected, while Atlanta Fed President Dennis Lockhart said he expects the Fed to be in a position to raise rates soon.
Bullion prices ended higher at Comex on Thursday, 29 September 2016. Gold futures staged a turnaround late in Thursday's session, settling higher as a drop in U.S. equities boosted the investment appeal of the precious metal.
December gold rose $2.30, or 0.2%, to end at $1,326 an ounce after tapping earlier lows under $1,320. Prices had tallied losses of roughly 1.6% over the past two trading sessions. Silver for December delivery added 6.7 cents, or 0.4%, to $19.188 an ounce.
Gold futures turned decisively higher in the last hour of Comex trading as losses for major U.S. equity indexes intensified on the back of worries about European banks. The indexes still looked set to end higher for the third quarter. European stock indexes finished mixed, but were also set for broad gains for the quarter.
Crude oil futures settled higher on Thursday, 29 September 2016 at Nymex as the OPEC plan to scale back production lifted prices for West Texas Intermediate crude to their highest level in more than a month.
On the New York Mercantile Exchange, November West Texas Intermediate crude tacked on 78 cents, or 1.7%, to settle at $47.83 a barrelthe highest futures prices since Aug. 23. November Brent crude on London's ICE Futures exchange finished at $49.24 a barrel, up 55 cents, or 1.1%. The contract expires at Friday's settlement.
The Organization of the Petroleum Exporting Countries reached an understanding at a meeting Wednesday in Algeria that there was a need to scale back production. OPEC members agreed on a preliminary outline to cut its collective output to between 32.5 million barrels a day and 33 million barrels a day, down from the levels of 33.2 million barrels a day in August. The cartel hasn't approved a production cut since 2008.
Treasuries ended on a higher note with yields slipping through the curve. The yield on the 10-yr note finished lower by one basis point at 1.56%.
Today's participation was above the recent average as more than 971 million shares changed hands on the NYSE floor.
Tomorrow's economic data will include Personal Income (consensus +0.2%), Personal Spending (consensus +0.2%), and Core PCE Prices (Briefing.com consensus +0.2%) for August, which will each be released at 8:30 ET. Separately, Chicago PMI (consensus 52.0) and the final reading of the University of Michigan Sentiment Index for September (consensus 90.0) will cross the wires at 9:45 ET and 10:00 ET, respectively.
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