Stocks Lower as Fed Fears Reassessed 05/23 16:33
Investors recovered their poise after a shaky start to trading on Wall
Street that sent stocks sharply lower.
NEW YORK (AP) -- Investors recovered their poise after a shaky start to
trading on Wall Street that sent stocks sharply lower.
U.S. markets plummeted immediately after the opening bell Thursday following
a global slump prompted in part by an unexpectedly weak report on manufacturing
in China. Concern that the Federal Reserve might ease back on its economic
stimulus program sooner than expected had also riled investors.
The dip gave investors who had missed this year's rally in stocks an
opportunity to get into the market, and by midday stocks had recouped most of
their early losses. The market even climbed into positive territory by midday,
before ending the day marginally lower.
"Most institutions, most hedge funds and most individuals have watched the
market go up without them, so the dips are being bought," said Jim Russell,
regional investment director at U.S. Bank. "There's a very strong case for U.S.
The Dow Jones industrial average ended the day just 12.67 points lower, or
0.1 percent, at 15,294.50, after falling as much as 127 points during the first
hour of trading.
For the most part, the U.S. stock market has been one-way traffic for
investors this year, with steady gains being punctuated by infrequent declines.
Optimism has been stoked by a pickup in hiring at U.S. employers, a recovery in
the housing market and record profits at U.S. corporations.
All that has helped push the Dow up 16.7 percent this year. The Standard &
Poor's 500 index is up 15.7 percent since the start of 2013.
On Thursday though, trading was volatile.
A sell-off in global markets came after minutes from the latest Fed meeting,
released Wednesday afternoon, indicated that several policymakers are leaning
toward slowing the central bank's bond-buying program as early as June, sooner
than many investors anticipated, if the economy continues to recover.
The central bank is spending $85 billion a month buying bonds. That program
has been keeping interest rates low in an effort to encourage borrowing,
spending and investing. It's also meant to encourage investors to buy risky
assets like stocks.
Investors were also unsettled by a report Thursday that showed manufacturing
in China, the world's No. 2 economy, unexpectedly shrank this month. HSBC Corp.
said the preliminary version of its monthly purchasing managers index had
dropped to a seven-month low.
China's booming economy has been a major driver of global growth in recent
years and investors worry when they see signs that it's slowing down.
Stocks fell sharply in Asia Thursday. Japan's Nikkei index dropped 7.3
percent after news was released about the slowdown in Chinese manufacturing.
The declines extended to Europe, where Germany's DAX index, which has been at a
record high, slid 2.1 percent.
The sell-off looked set to continue when trading opened in New York, but the
drop quickly hit bottom and shares reversed course.
Some investors also reevaluated the concern about the Fed easing, or
tapering, its economic stimulus program.
Any pullback of the Fed's stimulus should be seen as a positive signal
because it would mean that the U.S. economy is getting stronger, said Joe
Quinlan, chief market strategist at U.S. Trust.
"When the Fed starts to taper, the fundamentals of the U.S. economy have
improved even further than we have already seen," said Quinlan. "The Fed
tapering is actually a good story for U.S. equities and the economy."
Encouraging news about the U.S. economy also helped the case for stock
market bulls Thursday.
Sales of new homes rose in April to the second-highest level since the
summer of 2008, the Commerce Department reported Thursday. Also, the median
price for a new home hit a record high, another sign that housing is recovering.
There was good news on the labor market, too.
The number of Americans applying for unemployment benefits fell 23,000 last
week to 340,000, a level consistent with solid job growth, the Labor Department
said. That suggests employers are laying off fewer workers. The decline in
claims has coincided with steady job growth over the past six months.
In other U.S. stock trading, the Standard & Poor's 500 index closed down
4.84 points to 1,650.51, or 0.3 percent. The Nasdaq composite fell 3.88 points,
or 0.1 percent, to 3,459.42.
In commodities trading, the price of crude oil fell 0.55 cents, or 0.6
percent, to $96.16 a barrel. Gold rose $24.40, or 1.8 percent, to $1,391.80 an
ounce. The dollar fell against the euro and the yen.
In U.S. government bond trading, the yield on the benchmark 10-year Treasury
note edged down to 2.02 percent from 2.04 percent. The yield on the note falls
when the bond's price rises.
Among stocks making big moves, Ralph Lauren fell $4.37, or 2.3 percent, to
$183.69. The apparel seller reported revenue that fell short of what financial
analysts were expecting. Sluggish economic conditions and the decision to cut
certain businesses reduced sales.
PC maker Hewlett-Packard surged $3.63, or 17.1 percent, to $24.86, after the
company delivered second-quarter earnings that topped the estimates of both its
own management and financial analysts.
Dollar Tree rose $1.82, or 3.8 percent, to $50.19 after the discount
retailer said that its earnings climbed 15 percent as customers spent more at
its stores. The earnings beat the expectations of Wall Street analysts who
follow the company.