By Anora Mahmudova and Barbara Kollmeyer, MarketWatch
Middle East tensions drive up oil, gold prices
NEW YORK (MarketWatch)--U.S. stocks erased earlier losses
Thursday, with main indexes attempting to push higher as investors
shook off early morning jitters that were driven by concerns over
poor earnings prospects and worries that the Federal Reserve is
moving closer to a rate hike.
Military strikes in Yemen
(http://www.marketwatch.com/story/iran-warns-saudi-airstrikes-in-yemen-will-escalate-tension-in-region-2015-03-26)
had also sent investors scrambling for cover, pushing up prices of
perceived havens such as gold and the yen. Oil prices also jumped
on fears of a potential supply disruption from the Middle East.
Ahead of the opening bell, a better-than-expected report on
jobless claims did little to alleviate concerns of a marked
slowdown in the economy during the first quarter.
The S&P 500 (SPX) edged higher, up 0.1% to 2,063.57, with
eight of its 10 sectors trading in the green. Technology stocks
which took a beating on Wednesday rebounded.
The Dow Jones Industrial Average (DJI) in early trade declined
more than 100 points, but recovered to trade around 10 points
higher, a gain of 0.1%, at 17,729.
The Nasdaq Composite (RIXF) was up 0.1% at 4,879.
Implied volatility on the S&P 500, as measured by the CBOE
VIX Index (VIX) also subsided after an early jump and was at about
15.
Bruce McCain, chief investment strategist at Key Private Bank,
said that investors certainly have room to worry given that
earnings estimates declined markedly, while the economy has
softened.
"We've lost the support of the Fed's QE program, while there is
anxiety about the impending interest rate increases. With multiples
this high, there are more chances of corrections," McCain said.
McCain stressed that this is still not a time to be fully out of
stocks, especially for longer-term investors.
Michael O'Rourke, chief market strategist at JonesTrading,
believes what's happening is the market is reassessing data and
starting to view previous tailwinds as headwinds.
"When one considers the trends behind the major top-down
elements that investors watch--1. fundamentals in the form of
earnings, 2. policy in the form of the Fed, and 3. economic
data--all three were previous tailwinds that appear to be
transforming to headwinds as of late," O'Rourke said in a note.
The Stoxx Europe 600 index slid 1.6% ion Thursday trade. The
Nikkei 225 index posted the biggest losses in two months, with a
1.4% decline.
Read: Stocks are overpriced, overleveraged, headed for trouble
(http://www.marketwatch.com/story/stocks-are-overpriced-overleveraged-headed-for-trouble-2015-03-25)
Middle East tension also added to the mix. Investors drove up
gold prices (GCM5), which pushed through the psychologically
important level of $1,200 an ounce, while oil prices (CLM5) surged
more than 4% as news of a coordinated strikes in Yemen by five Gulf
states and Egypt triggered worries about crude supply. The yen
(USDJPY), another perceived-safe-haven asset, also surged against
the dollar, but gave back some gains.
Read: Oil prices surge as Saudi strikes in Yemen trigger supply
worries
(http://www.marketwatch.com/story/oil-prices-surge-as-saudi-strikes-in-yemen-trigger-supply-worries-2015-03-26)
(http://www.marketwatch.com/story/oil-prices-surge-as-saudi-strikes-in-yemen-trigger-supply-worries-2015-03-26)
(http://www.marketwatch.com/story/oil-prices-surge-as-saudi-strikes-in-yemen-trigger-supply-worries-2015-03-26)
(http://www.marketwatch.com/story/oil-prices-surge-as-saudi-strikes-in-yemen-trigger-supply-worries-2015-03-26)In
economic news, the number of people who made first-time claims for
weekly unemployment benefits
(http://www.marketwatch.com/story/jobless-claims-drop-9000-to-five-week-low-of-282000-2015-03-26)fell
more than expected, in a sign that companies are keeping their
workers despite what appears to be a marked slowdown in
first-quarter growth.
Stocks to watch: Shares of SanDisk Corp.(SNDK) plunged more than
18% after the company cut its sales outlook
(http://www.marketwatch.com/story/sandisk-shares-sink-after-revenue-outlook-cut-2015-03-26).
Accenture PLC(ACN) shares jumped after the management consulting
firm beat Wall Street profit expectations. The company also offered
an upbeat full-year sales outlook.
Red Hat Inc.(RHT) shares rose on the heels of
better-than-expected results
(http://www.marketwatch.com/story/red-hat-apollo-education-pvh-earnings-in-focus-2015-03-24)
released on Wednesday.
For more on notable movers, read Movers & Shakers column
(http://www.marketwatch.com/story/gamestop-lululemon-restoration-hardware-earnings-in-focus-2015-03-26).
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