By Ellie Ismailidou and Sara Sjolin, MarketWatch
Financials crumble; investors flock to gold, Treasurys
The Dow and S&P 500 rang up their fifth losing day in a row
Thursday, amid a global rout in risk assets led by tumbling oil
prices and losses in financial stocks.
The main indexes tried to stage a comeback in late-afternoon
trade, following headlines from The Wall Street Journal that the
Organization of the Petroleum Exporting Countries are "ready to
cooperate" on a production cut, citing the energy minister from the
United Arab Emirates. But that rally petered out.
Remarks from Federal Reserve Chairwoman Janet Yellen during her
second day of testimony on Capitol Hill didn't help lift investor
sentiment.
The Dow Jones Industrial Average saw its losses cut in half at
one point but it was still 216 points, or 1.4%, lower at 15,695,
weighed by a nearly 7% drop in Boeing Company (BA). If the
blue-chip gauge closes at this level, it would be its lowest
closing level Aug. 25.
The S&P 500 was down 18 points, or 1%, at 1,833, on track
for its lowest close since April 2014.
The index briefly fell below its Jan. 20 intraday low of
1,812.29, a significant support level, which has been described
(http://www.marketwatch.com/story/dow-futures-drop-200-points-setting-wall-street-up-for-an-ugly-start-2016-02-08)
as a "significant short-term technical formation" after which there
is "a downside pattern."
Meanwhile, the Nasdaq Composite was 9 points, or 0.2%, lower at
4,275, after briefly moving into positive territory.
Also read:Stock market live blog: Global equity rout
intensifies; yields plunge, yen soars
(http://blogs.marketwatch.com/thetell/2016/02/11/stock-market-live-blog-global-equity-rout-intensifies-yields-plunge-yen-soars/#wysiwygEditor)
A temporary lift from talk of a coordinated effort to cut oil
production was quickly discounted by investors who had heard
similar reports before. "OPEC rumors have boosted the market before
but the long-term trend has been the opposite: supply is going up,"
said Mike Bailey, director of research at FBB Capital Partners.
"We've heard this chatter enough times over the past month so
take it with a grain of salt. Either way though, we've reached an
extreme threshold of pain that this talk is even taking place,"
said Peter Boockvar, market analyst at Lindsey Group.
The global stock rout started overnight and deepened in U.S.
morning trade as Federal Reserve Chairwoman Janet Yellen testified
before the Senate Banking Committee
(http://blogs.marketwatch.com/capitolreport/2016/02/11/live-video-and-updates-of-janet-yellens-appearance-in-senate-committee/).
The Fed chief defended the central bank's December rate
increase, claiming it was designed to diminish accommodation "by a
modest amount", repeating many of her views expressed in her
testimony to the House Financial Services on Wednesday
(http://www.marketwatch.com/story/yellen-says-financial-conditions-less-supportive-to-growth-2016-02-10).
Strategists called Thursday's selloff a repeat of the same
risk-off theme fueled by fears of economic slowdown that has been
rattling global markets since the beginning of the year.
"It's a global cocktail that continues to be crafted on a daily
basis [including] worries about negative interest rates coupled
with pain in the banking sector and falling crude oil signaling
deflation," said Michael Antonelli, equity sales trader at R.W
Baird & Co.
As risk assets got slammed, demand for so-called haven assets
like gold and government bonds surged. The 10-year Treasury yield ,
the Treasury market's benchmark, plunged to a 3 1/2 -year-low
(http://www.marketwatch.com/story/treasury-yields-plunge-to-lowest-level-since-august-2012-2016-02-11),
while gold , also considered a safe asset, soared to a one-year
high
(http://www.marketwatch.com/story/gold-jumps-to-1-year-high-as-global-market-rout-spurs-safe-haven-buying-2016-02-11).
Stephen Guilfoyle, managing director of NYSE Floor Operations,
also cited the "outright depression in manufacturing" along with an
earnings recession and "crippled European financials" amid the
forces behind the selloff.
Financials were leading the S&P 500 losses, down 2.6%, as
ultralow interest rates and widening credit spreads have recently
fueled widespread worries about banks' balance sheets, sparking a
selloff in the banking sector. The SPDR Financial Select Sector
exchange-traded fund (XLF) has tumbled 15% year to date, according
to Morningstar. Banking giants Goldman Sachs Group, Inc. (GS) and
J.P. Morgan Chase & Co. (JPM) were among the leading laggards
on the Dow industrials, both down over 4%.
Banks were also leading the carnage in Europe , with Société
Générale tumbling 15% following a disappointing fourth-quarter
earnings report.
On Thursday, Sweden's central bank cut its main interest rate
even further below zero
(http://www.marketwatch.com/story/sweden-cuts-main-interest-rate-further-below-zero-2016-02-11-54851335)
as it sought to hold down the national currency to support a
recovery in the inflation rate toward a 2% target.
When asked about negative interest rates in the U.S. the Fed
Chief said that she didn't want to take them "off the table" as a
policy tool. Yellen said the Fed is "taking a look at them again"
to be prepared if the Fed needs to assist the economy.
Read:Bond market, Yellen face off on negative interest rates
(http://www.marketwatch.com/story/bond-market-yellen-face-off-on-negative-interest-rates-2016-02-10)
Fed expectations: The market-implied probability of more rate
hikes in 2016 continued to tumble on Thursday.
The December Fed-funds futures contract has fully taken out the
odds of a rate increase by year-end and the contract table all
through 2016 is now beginning to price in a rate cut, according to
data from the Lindsey Group.
On the U.S. data docket, the number of people who applied for
unemployment benefits in early February fell to the lowest level
(http://www.marketwatch.com/story/low-jobless-claims-show-no-sign-of-rising-layoffs-2016-02-11)in
almost two months, a reassuring sign that few workers are losing
their jobs despite a slowdown in hiring.
Greenback falls: The dollar plunged Thursday to the lowest level
against the yen
(http://www.marketwatch.com/story/dollar-slumps-to-lowest-level-against-yen-since-late-2014-2016-02-11)
since 2014, but later recovered somewhat as rumors circulated that
the Bank of Japan may have intervened to weaken its currency.
Read:The one stock sector you need to fight the bear-market flu
(http://www.marketwatch.com/story/the-one-stock-sector-you-need-to-fight-the-spreading-bear-market-virus-2016-02-11)
Oil blues: Falling oil prices were seen as fueling Thursday's
global market rout. West Texas Intermediate crude oil slid below
$27 a barrel, settling at its lowest level in nearly 13 years
(http://www.marketwatch.com/story/crude-shrugs-off-supply-decline-pushes-below-27-a-barrel-2016-02-11).
Oil prices pared losses in electronic trading, to trade down
1.4%.
The Velocity Shares 3X Long Crude ETN (UWTI) reversed heavy
losses to trade up 0.4%.
Other movers: Shares of Boeing Co. (BA) were on course to suffer
the biggest price plunge in the 44 years since the aerospace giant
went public
(http://www.marketwatch.com/story/boeings-stock-plunge-is-of-historic-proportions-2016-02-11),
following a Bloomberg report that the Securities and Exchange
Commission had launched an accounting probe.
Shares of Twitter Inc. (TWTR) lost 4.3% after the social-media
company late Wednesday reported flat user growth for the
fourth-quarter
(http://www.marketwatch.com/story/twitter-proves-wall-street-critics-were-right-2016-02-10).
On a more upbeat note, Cisco Systems Inc. (CSCO) jumped 10.4%
after its second-quarter earnings and revenue, released late
Wednesday, beat forecasts
(http://www.marketwatch.com/story/cisco-beats-estimates-and-raises-dividend-2016-02-10).
Tesla Motors Inc. (TSLA) gained 6.2% after the luxury electric
car maker said it could achieve a net profit
(http://www.marketwatch.com/story/tesla-reports-loss-but-says-profit-in-sight-2016-02-10)
in the final quarter of 2016.
PepsiCo Inc. (PEP) slipped 0.6% as the company issued a soft
outlook
(http://www.marketwatch.com/story/pepsico-profit-up-31-but-outlook-is-soft-2016-02-11).
After the market closes, American International Group Inc.
(AIG), Pandora Media Inc. (P) and CBS Corp. (CBSA) are scheduled to
release earnings.
Other markets: Hong Kong's Hang Seng Index returned to trading
after the Lunar New Year with a 3.9% tumble. That helped drive a
selloff at the open in Europe, where banks were hard hit. The Stoxx
Europe 600 index fell to its lowest close since October 2013
(http://www.marketwatch.com/story/european-stocks-knocked-to-lowest-since-2013-as-fear-selling-returns-2016-02-11).
(END) Dow Jones Newswires
February 11, 2016 16:05 ET (21:05 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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