Stock Market News for January 30, 2014 – Zacks Investment Research
Federal Reserve’s decision to further trim the economic stimulus plan dealt a heavy blow to benchmarks yesterday, which were already suffering following dismal earnings releases earlier in the day. Benchmarks hit multi-months low and S&P 500 is now at its worst monthly performance since May 2012.
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The Dow Jones Industrial Average (DJI) slumped about 190 points, or 1.2%, to close at 15,738.79. The Standard & Poor 500 (S&P 500) was down a little over 1% to finish at 1,774.20. The tech-laden Nasdaq Composite too suffered heavy losses, dropping 1.1% to close the session at 4,051.43. The fear-gauge CBOE Volatility Index (VIX) jumped 9.8% to settle at 17.35. The decline was amplified by heavy volumes as total volume on the US exchanges was 7.5 billion, higher than this month’s average of 6.8 billion. Declining stocks outpaced advancers on the New York Stock Exchange, as for 75% stocks that lost, only 22% could move up.
Markets had opened lower yesterday but selling was intensified following the central bank’s decision to cut another $10 billion from the original $85 billion third quantitative easing plan. The latest cut mirrors a similar move last month when the Fed had decided to taper the $85 billion asset repurchase plan. The decision came in during what was Fed chairman Ben Bernanke’s last-policy setting meeting. Interest rates will continue to be low, but the central bank may continue with its tapering every month.
According to the Federal Open Market Committee latest policy statement: “Beginning in February, the Committee will add to its holdings of agency mortgage-backed securities at a pace of $30 billion per month rather than $35 billion per month, and will add to its holdings of longer-term Treasury securities at a pace of $35 billion per month rather than $40 billion per month”.
As anticipated, this development had a major negative impact on benchmarks. Yesterday’s slump handed S&P 500 its fourth loss in five trading session and the benchmark is now 4% below its record high hit on Jan 15. The blue-chip index is 5.1% away from its record high achieved on the final day of the last year and has closed in the red six times of seven trading sessions. In fact, the blue-chip index suffered its fifth triple-digit loss this month and is down 5.1% so far this month.
Declines over the last few days are largely due to the contraction in China’s manufacturing sector and concerns emanating from political and economic issues in the emerging markets. Last week, emerging-market currencies suffered their worst selloff in five years. Argentina’s peso had its worst fall since 2002. A threat to the stability of the government in Turkey has seen its currency hitting record lows of late. Separately, hryvnia, Ukraine’s currency, dropped to a four-year low. South Africa’s rand saw itself weakening beyond 11 per dollar for the first time since 2008.
Turkey and South Africa’s latest efforts to add stability to their currencies were of to no avail and global markets continued the selloff. South Africa’s central bank hiked its interest rates for the first time in over half a decade. This was followed by a rate hike by the Turkish central bank.
Apart from concerns about emerging markets, investors were also unnerved by weak earnings results and forecasts. Tech-bellwether Yahoo! Inc. (NASDAQ:YHOO) slumped 8.7% after it released sales projections, delivering a warning about slowing growth. This was Yahoo’s biggest drop since Jul 2009.
Another heavyweight, The Boeing Company (NYSE:BA) was the biggest drag on the blue-chip index and S&P 500. It fell 5.3% after sales forecast failed to match analysts’ expectations. Also, AT&T, Inc. (NYSE:T) issued disappointing sales forecasts and its shares were down 1.2%.
The consumer staples sector suffered the biggest fall among S&P industry groups yesterday and the Consumer Staples Select Sector SPDR (XLP – ETF report) dropped 1.8%. Among key stocks, The Procter & Gamble Company (NYSE:PG), The Coca-Cola Company (NYSE:KO), Philip Morris International, Inc. (NYSE:PM), CVS Caremark Corporation (NYSE:CVS) and Pepsico, Inc. (NYSE:PEP) declined 1.9%, 2.5%, 1.7%, 1.7% and 2.6%, respectively.
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Stock Market News for January 30, 2014 – Zacks Investment Research
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