Dismal factory data from Europe and China dragged the domestic markets down to yet another finish in the negative territory. Separately, U.S. crude oil prices dropped to a two-month low, with widespread skepticism about uncertain economic conditions hurting energy demand. These concerns overshadowed a domestic report reflecting another drop in initial claims. While the markets suffered another set of reverses, the S&P 500 moved down from the 1, 400 level and may soon end its six-week winning streak.
The Dow Jones Industrial Average (DJI) lost 0.6% to close the day at 13,046.14. The Standard & Poor 500 (S&P 500) plunged 0.7% to finish yesterday’s trading session at 1,392.78. The tech-laden Nasdaq Composite Index shed 0.4% to settle at 3,063.32. The fear-gauge CBOE Volatility Index (VIX) gained 2.9% to move up to 15.57. Consolidated volumes on the New York Stock Exchange, Nasdaq and Amex were 6.3 billion shares, lower than this year’s daily average of roughly 6.86 billion shares. On the NYSE, the decliners outnumbered the advancers by a ratio of 3 to 1.
Unlike most of the past weeks, benchmarks have suffered a rough ride so far this week. Throughout this week, the domestic arena lacked major events and tepid housing data on Monday could hardly support benchmarks on the very first trading day of the week. All of the benchmarks hovered between small gains and losses and often struggled for direction. Moreover, this week, none of the indices could manage a movement of over 1.0% in either direction. Counting yesterday’s losses, the Dow, S&P 500 and Nasdaq are down 1.4%, 0.8% and 0.3%, for the week so far. Now all depends on what happens on Friday, otherwise the benchmarks look set for a rare negative close for the week.
Moreover, this may be the S&P 500’s first loss in six weeks. Also, while the Dow and Nasdaq are still above their individual key levels, the S&P 500 dropped down from the 1, 400 mark it achieved only recently.
Global cues dampened the mood in the domestic circuit yesterday, negating positive U.S. labor market data. Manufacturing shrunk for the fifth-consecutive month in the world’s second largest economy, China. The Chinese manufacturing index, which is compiled by HSBC, dropped to a four-month low of 48.1 in March, down from 49.6 in February. Reportedly, dismal exports, detrimental order book and new hiring, which declined to a two-year low were responsible for dragging down the manufacturing index.
Separately, news from across the Atlantic also disappointed investors after Germany and France reported lower-than-expected manufacturing data. In Germany, the Purchasing Managers’ Index for the service sector dropped from February’s 52.8 to 51.8 in March. The manufacturing PMI was down to 48.1 from 50.2 in the last month. Both of these indices were lower than expectations of 51.0 and 53.1, respectively. Separately, the manufacturing PMI in France dropped from 50 in February to 47.6 in March.
These concerns weighed on investors sentiment and skepticism about economic health also sparked off fears of a decline in the demand for energy sector. US crude prices dropped 1.8% and the Energy SPDR Select Sector Fund (XLE) was down 2.3%. Among the energy stocks, Exxon Mobil (NYSE:XOM), Chevron Corporation (NYSE:CVX), ConocoPhillips (NYSE:COP), Marathon Oil Corporation (NYSE:MRO) and Valero Energy Corporation (NYSE:VLO) plunged 0.8%, 2.4%, 1.8%, 3.1% and 2.6%, respectively.
On the economic front, initial claims decline once again, indicating a recovery in the labor market. According to the U.S. Department of Labor: “In the week ending March 17, the advance figure for seasonally adjusted initial claims was 348,000, a decrease of 5,000 from the previous week’s revised figure of 353,000. The 4-week moving average was 355,000, a decrease of 1,250 from the previous week’s revised average of 356,250”. Consensus estimates had projected initial claims to come in at 354, 000. However, this data was overshadowed by other concerns and benchmarks could use this report as a catalyst for an uptrend yesterday.
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