By Anora Mahmudova, MarketWatch
NEW YORK (MarketWatch) -- The U.S. stock market extended losses
for the second day and finished lower Thursday, amid concerns that
improving economic indicators might force the Fed to start raising
rates sooner than anticipated.
The fourth-quarter GDP figures were revised up, while weekly
jobless claims fell by more than expected to the lowest level in
four months.
The S&P 500 (SPX) ended the day 3.52 points, or 0.2%, lower
at 1,849.04, below a key support level of 1,850. Losses on the
index were led by technology and financial sector stocks. The
benchmark index erased gains for the year.
The Dow Jones Industrial Average (DJI) closed 4.76 points lower
at 16,264.23.
The Nasdaq Composite (RIXF) finished the day 22.35 points, or
0.5%, lower at 4,151.23. The tech-heavy index is also negative for
the year after a nearly 3% loss since the start of the week.
Follow MarketWatch's live blog of Thursday's stock-market
action.
"Markets are showing a little fatigue and it probably goes back
to tapering starting to have more impact," said Wasif Latif, vice
president of equity investments at USAA Investments.
"Despite better than-expected GDP and jobless data it turned out
to be bad day for the market, where the good news probably means
the rates will go up higher, earlier," Latif said.
"The rise of rates and the end of QE may be being underestimated
on how negative it might be for the market despite of improving
economy," he added.
Read: 6 charts to decide when to panic about rate hikes
Quincy Krosby, market strategist at Prudential Financial, said
that it is not unusual to see volatility at the end of the
quarter.
"We are in the final days of the first quarter, which means
portfolio managers are shifting and allocating money and perhaps
causing a rotation from the sectors. If we begin to see the
rotation out of cyclicals and into defensive sectors, that would
mean investors are turning cautious," Krosby said.
Government data showed that the economy's growth in the fourth
quarter was bumped up to 2.6%, mainly because of higher health-care
spending, while weekly unemployment benefits fell to the lowest
level in four months, offering further evidence that U.S. layoffs
have slowed sharply and perhaps a hint that hiring is about to pick
up.
Slumping for an eighth month, a guage of pending home sales fell
0.8% in February to the lowest level in more than two years,
signaling that upcoming activity may slow, the National Association
of Realtors reported.
Federal Reserve officials continued to hit the speaking circuit,
expanding on last week's meeting. Cleveland Fed president Sandra
Pianalto said "no single data point will determine how long the
Federal Reserve can keep short-term interest rates low."
"We will be watching labor market conditions, indicators of
inflation pressures and inflation expectations, and readings on
financial developments. It is a complicated world out there,"
Pianalto said.
The Federal Reserve seems to be doing a better job communicating
with markets now than it did last summer, according to William
Dudley, president of the central bank's New York branch, on
Thursday.
Citigroup slumps after Fed rejects its capital plan
Citigroup (C) shares fell 5.4% after the bank failed to measure
up to the Federal Reserve's stress-test requirements. Citi wasn't
the only bank to be told late Wednesday that it needs to shore up
its capital plans, but it was the biggest, and the news seemed to
catch investors -- and the bank -- off guard.
Baxter International Inc. (BAX) shares rose 3.9% after the
company said Thursday it plans to split into two entities, one
focused on developing and marketing biopharmaceuticals and the
other on medical products.
Lululemon(LULU) shares jumped 6.2% after posting a steady profit
and higher revenue, but downside guidance.
GameStop (GME) shares fell 4% after the company reported
quarterly results below consensus estimates.
Gold falls below $1,300; European stocks fall
In other markets, gold prices (GCJ4) fell below the key
$1,300-an-ounce level, while oil (CLM4) settled higher.
European stocks struggled and moved lower, while Asia saw a
mixed day, with the Nikkei 225 index jumping 1% and the Shanghai
Composite Index closing down 0.8%.
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