Stock Market News for March 17, 2011 - Market News

Indices washed out most of the gains of 2011 and plunged significantly as benchmarks S&P 500 and Nasdaq moved into negative territory for the year and the Dow had its worst showing in eight months. On the second-busiest trading day of the year, the crisis in Japan worsened and comments from the European Union about the situation strengthened fears of a nuclear catastrophe. Investors remained tense about the challenges that the crisis was going to create for the global economic recovery. Additionally, investors’ mood was also dampened by the continuing tensions in Libya and Bahrain.

The Dow Jones Industrial Average (DJIA) suffered its worst run in eight months as it lost 2.04% and closed at 11,613.3. All 30 components of the Dow were on the declining side. Both the Standard & Poor 500 and Nasdaq erased their gains for the year as they entered negative territory for 2011. The S&P 500 lost 1.95% to close at 1256.88 and ended at a yearly loss of 0.06%. The Nasdaq fell 1.89% to end at 2616.82, posting its lowest close for 2011. The second-busiest trading day reflected the market’s negative mood and consolidated volumes on New York Stock Exchange were at 5.8 billion shares, with decliners overshadowing advancers by a ratio of 3:1. The consolidated volumes on NYSE, AMEX and Nasdaq were 11.1 billion shares, significantly ahead of last year’s daily average of 8.47 billion. The fear gauge, CBOE Volatility Index (VIX) sky-rocketed to over 29 and posted its highest levels in over 8 months. With a jump of 21%, this was the biggest percentage gain since February 22, 2011. The VIX had soared to 31 during the day, the first time since July last year. The VIX has now posted a 46% gain for the week.

Japan’s crisis has instilled fear and created significant concerns over the global economic recovery. Radiation in Tokyo, on Tuesday, was up to a worrying 0.809 microsieverts per hour. Stocks, which were already in a downward spiral, received another jolt as Guenther Oettinger, European Union’s (EU) energy commissioner stated: “There is talk of an apocalypse and I think the word is particularly well chosen. Practically everything is out of control. I cannot exclude the worst in the hours and days to come”. He also warned and said: “In the coming hours, there could be further catastrophic events, which could pose a threat to the lives of people on the island”.

News about the worsening crisis in the third largest economy in the world, a country which accounts for 10% of all US exports, was reason enough to send a chill down the spines of traders. Phil Orlando, chief equity strategist at Federated Investors noted: “Japan trumps everything for everyone right now” and “every investment decision is made through the prism of what is going on in Japan.” Meanwhile, the Pentagon ordered the US military to maintain a minimum distance of 50 miles from the Japanese nuclear plant. U.S Nuclear Regulatory Chairman, Gregory Jaczko, urged a larger evacuation radius from Fukushima nuclear plant as the radiation levels were “extremely high”. Almost every comment made regarding the crisis had a corresponding reaction in the US markets as they encouraged negative sentiments.

Damaged nuclear plants will likely require Japan to import energy sources like oil, natural gas and coal. With 13 reactors at 4 nuclear plants shutting down in Japan, 25% of electricity power generation may be hampered. Five of the coal-fired plants have also shut down and Japan is in dire need of higher imports to overcome shortages. This combined with other global concerns has put energy supply-demand dynamics into a state of confusion. As a result, crude prices got another lift, on Wednesday. On the New York Mercantile Exchange, crude for April delivery gathered 80 cents and settled at $97.98 per barrel.

Crude prices had been soaring after unrest in Middle East and North Africa. These worries intensified after protestors clashed with police and soldiers in Bahrain. Events in Bahrain gain importance as it is in the neighborhood of Saudi Arabia, the largest producer of oil. Troops from Saudi Arabia had entered Bahrain to provide support to the monarch. The unrest is feared to spread to the fringes of Saudi Arabia and then sweep into its territory, which will have dangerous consequences on oil production. The Libyan leader Muammar Gaddafi continued his fight against the uprising as production from the country, which accounted for 2% of the world’s daily oil output, reaches stagnation. In Nymex trading for April contracts, heating oil gained 4.34 cents to reach $2.9972 per gallon and gasoline futures were up by 4.08 cents to end at $2.8437 per gallon. However, natural gas shed 0.3 cents to settle at $3.938 per 1,000 cubic feet.

To add to the global concerns, Moody’s credit rating agency highlighted Portugal’s worsening financial situation as it downgraded Portugal’s sovereign debt rating by two notches to A3, on Tuesday. Moody can further downgrade the debt rating in lieu of the higher borrowing costs and difficulty in achieving tougher fiscal targets.

Disappointing US economic data further added to the gloom of investors. The Commerce Department reported that new home construction declined to its second-all-time-low levels as it plunged 22.5% to a seasonally adjusted annual rate of 479,000 in February. The figure escaped reaching the lowest levels for all time, 477,000 recorded in April, 2009, by a meager 0.4%. The sharp fall reflected weak demand and it boosted pessimism about the hopes of an economic recovery. Housing sector stocks took a beating following the report and shares of PulteGroup, Inc. (NYSE:PHM), Lennar Corp. (NYSE:LEN) and Toll Brothers Inc. (NYSE:TOL) shed 1.7%, 2.9%, and 2.2%, respectively.

Separately, the Commerce Department reported US current account deficit has narrowed to $113.3 billion in the fourth quarter from $125.5 billion in the previous quarter. In other economic news, wholesale prices were up by the most in almost two years, increasing by 1.6% for February, as energy and food prices escalated. The wholesale energy index gained 3.3% in February, marking its fifth consecutive jump. The wholesale price of food index surged 3.9%, posting its largest gain since November 1974. Excluding food and energy prices, core prices surged 0.2%.

Coming to news for the technology sector, Apple Inc. (NASDAQ:AAPL) fell 4.5% after a broker downgraded it to “market perform”. Fears of component shortages arising from the Japan crisis hit shares of Google Inc. (NASDAQ:GOOG), Microsoft Corporation (NASDAQ:MSFT) and Oracle Corp. (NASDAQ:ORCL) as they sank 2.2%, 2.4% and 3.1%.

Energy shares were on the winning side and were the leading gainers for the S&P 500. Gainers included, Peabody Energy Corp. (NYSE:BTU), Chesapeake Energy Corporation (NYSE:CHK) and Southwestern Energy Co. (NYSE:SWN), which rose by 3.9%, 3.1% and 3.3%, respectively.

Shares of International Business Machines Corp. (NYSE:IBM), General Electric Co. (NYSE:GE) and American Express Company (NYSE:AXP) were the biggest laggards for the Dow and dipped 3.8%, 3.4% and 2.9%, respectively.

Stock Market News for March 17, 2011 – Market News

SIGN UP TO NEWSLETTER

Free E-Book

Recent Posts