By Anora Mahmudova and Sara Sjolin, MarketWatch
U.S. stocks sold off on Wednesday, building on steep losses from
the previous session as Federal Reserve Chairwoman Janet Yellen
spooked investors by warning of potential pitfalls for investors,
referring to stock values as "quite high."
Traders already had been fretting after a lower-than-forecast
ADP employment raised nervousness among investors ahead of the more
closely followed nonfarm payrolls report slated for Friday.
Implied volatility on the S&P 500, as measured by the CBOE
Volatility index -- a measure of investor nervousness--jumped above
16, suggesting investors are getting worried.
The Dow Jones Industrial Average(DJI) is down 159 points, or
0.9%, to 17,770.52 and had turned negative for the year. The Nasdaq
Composite(RIXF) lost 41 points, or 0.8%, to 4,898.22.
The S&P 500(SPX) fell 16 points, or 0.8%, to 2,072.76 with
all 10 main sectors trading lower, but was still positive for the
year, up 0.5% year-to-date. Telecoms, utilities and technology
stocks led the losses.
Yellen's comments came at a panel discussion Wednesday
(http://www.marketwatch.com/story/yellen-sees-dangers-in-quite-high-stock-valuations-2015-05-06)
with the head of the International Monetary Fund, Christine Lagarde
and didn't help lift investors' spirits.
Uri Landesman, president at Platinum Partners, said he agreed
with Janet Yellen's assertion: "Stocks prices have been propped up
because of lack of alternatives and that is not a good reason to
buy stocks ...," he noted.
"While the long-term momentum is still positive, people are
beginning to get nervous. A correction at this point would be
welcome," Landesman said.
Investors had been digesting a report, released before U.S.
stocks opened for trading, which showed the pace of hiring in the
private sector slowed in April. Meanwhile, productivity slumped for
the second quarter in a row. Some economists dismiss the ADP report
as it has little predictive power for the official nonfarm payrolls
due on Friday.
Data: The U.S. created 169,000 private-sector jobs in April,
payrolls processor ADP said, after a downwardly revised 175,000
jobs were created in March, well below the consensus estimate. A
slowing pace of job gains may prompt the Federal Reserve officials
to delay raising interest rates after the June meeting.
U.S. productivity in the first quarter fell by a 1.9% annual
pace, resulting in the first back-to-back drop since 2006. The
decline in productivity stemmed from companies hiring more workers
and employees working longer hours even as production of goods and
services declined.
Earnings:Wendy's Co.(WEN) released first-quarter adjusted
earnings per share that slightly beat consensus, but revenue missed
forecasts. Still, shares jumped 4.9%.
SodaStream International Ltd.'s(SODA) first-quarter earnings met
FactSet consensus estimates, but revenue came short of forecasts.
Shares fell 5.8%.
Shares of Herbalife Ltd.(HLF) climbed 16% after the
nutrition-supplement maker late Tuesday raised its outlook for the
year
(http://www.marketwatch.com/story/herbalife-raises-guidance-as-earnings-grow-48-2015-05-05-174852122)
as earnings rose a stronger-than-expected 4.8% in the first
quarter.
Internet stocks were taking a beating on Wednesday. Twitter,
Inc. (TWTR), LinkedIn Corp. (LNKD) and Yelp Inc. (YELP) had been
down more than 1.6%.
For more on today's notable movers read Movers & Shakers
column
(http://www.marketwatch.com/story/sodastream-tesla-keurig-green-mountain-earnings-in-focus-2015-05-06).
Other markets:Asian markets
(http://www.marketwatch.com/storyno-meta-for-guid) closed lower,
while European stocks
(http://www.marketwatch.com/storyno-meta-for-guid) were mostly
higher.
Crude oil (CLM5) moved briefly above $62 a barrel for the first
time since December
(http://www.marketwatch.com/storyno-meta-for-guid), while gold
prices were slightly lower. The dollar (DXY) was pushing lower
against other major currencies, particularly the euro which broke
$1.13 against the buck.
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