The Nasdaq suffers its worst day since late 2011
US stocks ended with steep losses on Thursday, 10 April 2014. The Nasdaq Composite suffered its worst day since late 2011 on Thursday as investors fled biotech, Internet and other high-growth stocks, the sectors that had led the latest rally. The sentiment began deteriorating during the overnight session when China reported a surprise trade surplus of $7.71 billion, which was due to disappointing import and export figures. This renewed some of the concerns about the strength of the Chinese economy, which have been present since the start of the year.
The Dow Jones Industrial Average fell 266.96 points, or 1.6%, to 16,170.22. The Nasdaq Composite dropped 129.79 points, or 3.1%, its worst one-day percentage decline since November 2011. The S&P 500 ended the day 39.10 points, or 2.1%, lower at 1,833.08.
The market place Thursday was still digesting Wednesday afternoon's release of the minutes of the latest meeting of the Federal Reserve's Open Market Committee (FOMC). The U.S. stock indexes and gold rallied and the U.S. dollar index sold off in the wake of that report. Traders and investors looked at the FOMC minutes and decided the last FOMC meeting, combined with recent remarks from Fed Chair Janet Yellen, paint a picture that is decidedly more dovish than they had earlier reckoned. Most now believe it will be a longer period of time before the Fed starts to raise its interest rates. More money in the U.S. banking system (quantitative easing) is bullish for the U.S. stock market and also bullish for raw commodities due to the inflationary implications.
The caution that was exhibited in the foreign exchange market appeared to have faded by this morning, but the yen began strengthening ahead of the New York open, and returned to the overnight lows not long after.
The U.S. dollar index has taken a beating this week and fell to a three-week low overnight. The eroding greenback is a bullish underlying factor for the raw commodity sector.
In overnight news, China's latest trade data again disappointed the market place. March exports were down 6.6% year-on-year, while imports fell 11% in the same period. Part of the decline in exports was blamed on companies over-inflating their invoices on exports last year. This news is a bearish underlying factor for the raw commodity sector, as China is the world's largest raw commodity importer.
U.S. economic data released Thursday included the weekly jobless claims report, import and export price indexes, the monthly Treasury budget statement, and ICSC chain store sales trends. None of this data impacted the market place much.
The weekly initial claims level fell to 300,000its lowest point since May 2007from an upwardly revised 332,000 (from 326,000), while the consensus expected the claims level to fall to 325,000. The size of the drop in claims was unusual, and while the Department of Labor did not issue any statements explaining the decline, there tends to be normal seasonal volatility over the first few weeks of April due to yearly calendar shifts in the Easter holiday.
Export prices, excluding agriculture, increased 0.5% in March after increasing 0.6% in the prior reading. Excluding oil, import prices rose 0.3%, which follows last month's downtick of 0.1%. The Treasury Budget for March showed a deficit of $36.90 billion, which followed the prior month's deficit of $106.50 billion. The consensus expected the deficit to hit $36.00 billion.
Bullion prices ended the U.S. day session with good gains and gold hit a two-week high on Thursday, 10 April 2014. The metal was boosted by safe-haven demand, perceptions of a more dovish U.S. Federal Reserve, and a weaker U.S. dollar index.
Gold prices climbed by more than 1% on Thursday to settle at their highest level in nearly three weeks after minutes from the Federal Reserve's most recent meeting had a less hawkish tone than investors expected. Gold for June delivery climbed $14.60, or 1.1%, to settle at $1,320.50 an ounce on the Comex division of the New York Mercantile Exchange. Silver also got a boost from the Fed minutes. May silver rose 32 cents, or 1.6%, to $20.09 an ounce, after closing down 1.4% on Wednesday.
Crude Oil futures settled lower for the first time in three sessions on Thursday, 10 April 2014, pressured by weak Chinese economic data though losses were modest as investors digested news of a drop in output from key oil producers, encouraging U.S. jobs data and continued tensions in Ukraine. Natural-gas prices, meanwhile, bucked the broader trend among major energy futures, closed higher after a smaller-than-expected increase in weekly U.S. supplies of the fuel.
Crude oil for May delivery fell 20 cents or 0.2%, to settle at $103.40 a barrel on the New York Mercantile Exchange. It had tallied gains of just over 3% over the past two trading sessions to close at a five-week high on Wednesday.
Participation was a bit above average as 786 million shares changed hands at the NYSE.
Indian ADRs ended lower on Thursday. In the IT space, Infosys shed 2.48% at $52.75 and Wipro was down 2.17% at $13.09. In the banking space, ICICI Bank declined 3.8% at $43.08 and HDFC Bank fell 1.23% at $41.02. In the other sectors, Tata Motors slipped 0.4% at $37.81 and Dr Reddy's Laboratories plunged 3.93% at $42.25.
Tomorrow, March PPI (consensus 0.1%) and Core PPI (consensus 0.1%) will be released at 8:30 ET, while the preliminary reading of the Michigan Sentiment survey for April (consensus 81.0) will cross the wires at 9:55 ET.
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