Rising political tension between Russia and the West over Crimea dragged the benchmarks down to their worst fall in over five weeks. Lingering concerns about a possible slowdown in China also impacted the indices. The S&P 500 fell below a technical level and the year-to-date figure dropped to the red zone. The Dow suffered its fourth straight decline. Encouraging economic reports on retail sales and unemployment benefits failed to prevent the losses.
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The Dow Jones Industrial Average (:DJI) plunged 1.4% to close Thursday’s trading session at 16,108.89. The Standard & Poor (S&P 500) fell 1.2% to finish at 1,846.34. The tech-laden Nasdaq Composite Index declined 1.5% to 4,277.30. The fear-gauge CBOE Volatility Index (:VIX) surged 12.1% to settle at 16.22. Total volume on the New York Stock Exchange was 3.6 billion shares. Advancing stocks were outnumbered by declining stocks on the NYSE. For 32% stocks that advanced, 66% declined.
Benchmarks entered negative territory after the dispute between Russia and the West flared up once again, dampening investor sentiment. On Thursday, Russia launched a fresh military exercise on the borders of Ukraine despite sanctions imposed by the European Union on Wednesday.
Benchmarks had opened in the green but turned negative after US President Barack Obama warned Russia to curtail their aggression over Ukraine. Otherwise, he said, the United States and other countries will be “forced to apply costs” to Moscow. Obama met with Ukraine's prime minister at the White House yesterday. Citizens in Crimea will vote on Sunday to decide whether to stay with Ukraine or become part of Russia.
Investors’ confidence further dipped over growing concerns about China’s economy. Larger-than-expected decline in Chinese exports of 18.1% year over year in February, reported on Monday, raised concerns of a slowdown in the world’s second-largest economy. The anxiety further intensified on Thursday after Chinese government reported year-over-year increases in industrial production, fixed asset investment and retail sales by 8.6%, 17.9% and 11.8%. The numbers were short of analysts’ expectations of a rise by 9.5%, 19.4% and 13.5%, respectively. Taken together, these international events unnerved investors and they moved from the equities to invest in safe-haven assets.
Economic data failed to provide any cheer to the markets. The U.S. Department of Commerce reported that seasonally adjusted sales of retail and food services for February rose 0.3% in February, beating estimates of a 0.2% increase. This rise in retail sales in February was in sharp contrast to declines of 0.4% in January and 0.1% in December 2013. Retail sales in the months of January and December were affected due to the harsh winter weather conditions. However, an improvement in the climate during the last two weeks of February boosted the sales level.
The Department of Labor reported that seasonally adjusted initial claims dropped 9,000 to 315,000 in the week ending March 8. This fall in claims for unemployment benefits in the first week of March touched the lowest level in more than three months. The drop was in sharp contrast to the consensus expectation of initial claims rising to 330,000.
Separately, the U.S. Department of Commerce reported that business inventories increased 0.4% in January. This was in line with the consensus estimate.
Nine out of ten sectors of the S&P 500 ended in red. The Industrial Select Sector SPDR (XLI) and the Health Care Select Sector SPDR (XLV) led the decline as both the sectors plummeted 1.4%. Top holdings from the Industrial sector such as General Electric Company (NYSE:GE), United Technologies Corp. (NYSE:UTX), The Boeing Company (NYSE:BA), Union Pacific Corporation (NYSE:UNP) and 3M Company (NYSE:MMM) decreased 1.6%, 2.5%, 2%, 0.9% and 1.3%, respectively.
Key stocks from the Health care sector such as Johnson & Johnson (NYSE:JNJ), Pfizer Inc. (NYSE:PFE), Merck & Co. Inc. (NYSE:MRK), Gilead Sciences Inc. (NASDAQ:GILD) and Amgen Inc. (NASDAQ:AMGN) fell 0.6%, 2.7%, 1%, 2.2% and 1.6%, respectively.
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Read the analyst report on BA
Read the analyst report on UNP
Read the analyst report on MMM
Read the analyst report on JNJ
Read the analyst report on PFE
Read the analyst report on MRK
Read the analyst report on GILD
Read the analyst report on AMGN
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