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Wall St. Stocks Drop, Riding Roller Coaster Back Down After Best Day Since ’09 Wall St. Stocks Drop, Riding Roller Coaster Back Down After Best Day Since ’09
(about 2 hours later)
Wall Street’s roller-coaster ride continued on Thursday, with stocks tumbling as euphoria over a surge in prices a day earlier began to fade. Wall Street’s roller-coaster ride continued on Thursday, with another stock sell-off erasing a portion of Wednesday’s gains, as investors turned their attention to fresh warning signs about the United States economy.
Investors have struggled to get their bearings this month as the S&P 500 hurtled toward bear-market territory. They are trying to assess the prospects for economic growth and corporate profits as interest rates rise and a trade war with China continues, while also factoring in internal White House turmoil and President Trump’s antipathy toward Jerome H. Powell, the Federal Reserve chairman. There were a few new clues about the economy’s health, but they sent mixed signals: Weekly jobless claims were lower, a positive sign, but expectations for job growth, as measured by the monthly consumer confidence index, hit a five-month low.
Investors have struggled to get their bearings this month as the S&P 500 hurtled toward bear-market territory. They are trying to assess the prospects for economic growth and corporate profits as interest rates rise and a trade war with China persists, while — most recently — also factoring in internal White House turmoil and President Trump’s antipathy toward Jerome H. Powell, the Federal Reserve chairman.
“It’s an inflection point in expectations,” said David Donabedian, the chief investment officer for CIBC private wealth management in Atlanta.
While he said trading volume was lower than normal as a result of the holiday week, which meant each trade could have an exaggerated effect on stock prices, Mr. Donabedian cautioned against playing down the significance of this week’s gyrations.
“There are a lot of people searching for something else, some technical factor, or is it algorithmic trading, but I really think this is driven by rising uncertainty about the fundamentals: earnings, the economy and interest rates,” he said.
[Read more about investors’ biggest concerns, and about how technology stocks fell into a bear market last week.][Read more about investors’ biggest concerns, and about how technology stocks fell into a bear market last week.]
Concerns about the White House’s response to what has been a rough December for Wall Street grew last week as Mr. Trump used Twitter to vent his frustration over the Fed’s decision to keep raising interest rates and sought guidance from aides about whether he could fire Mr. Powell. Concerns about the White House’s response to Wall Street’s decline grew last week as Mr. Trump used Twitter to vent his frustration over the Fed’s decision to keep raising interest rates and sought guidance from aides about whether he could fire Mr. Powell. Despite the president’s frustrations, a number of White House officials have tried to reassure investors that Mr. Powell’s job is safe.
Traders have had their own concerns with Mr. Powell as well: At a news conference on Dec. 19 he used a word that is still ringing in market participants’ ears — “autopilot” — to describe the Fed’s likely approach to monetary tightening.
This suggested to investors that the Fed might not be willing to change its plans to further raise rates and drain money from the financial system, even if market turmoil persisted. Other Federal Reserve officials quickly moved to assuage those worries after the Dec. 19 announcement, but Mr. Donabedian said he expected anxiety about the Fed’s flexibility to persist until at least the end of the next meeting of the Federal Reserve Board on Jan. 30.
The partial shutdown of the federal government could also begin to wear on investors as they are forced to operate without official data that could help answer lingering questions about the health of the American economy. On Thursday, for instance, a Census Bureau report on new home sales was delayed because of the shutdown.The partial shutdown of the federal government could also begin to wear on investors as they are forced to operate without official data that could help answer lingering questions about the health of the American economy. On Thursday, for instance, a Census Bureau report on new home sales was delayed because of the shutdown.
Investors got some data to digest on Thursday, and it was not encouraging. A report on consumer confidence by the Conference Board, a business group, showed Americans growing more pessimistic about economic conditions. In China, officials said industrial profits had declined in November for the first time in three years, a reminder that the growth of the world’s second-largest economy continues to slow. Investors got some data to digest on Thursday, and it was not encouraging. A report on consumer confidence by the Conference Board, a business group, showed Americans growing more pessimistic about economic conditions. In China, officials said industrial profits had declined in November for the first time in three years, a reminder that the growth of the nation’s economy, the world’s second-largest, continues to slow.
With financial markets seemingly lurching this way and that depending on each day’s headlines, trading has become particularly volatile lately. The sharp decline on Thursday came after the S&P 500 had its best day since 2009. Those gains followed reports of strong holiday-shopping sales, a jump in crude oil prices and reassuring words from the White House about the Fed. With financial markets seemingly lurching this way and that depending on each day’s headlines, trading has become particularly volatile lately. The sharp decline on Thursday came after the S&P 500 had its best day since 2009. Those gains followed reports of strong holiday-shopping sales, a jump in crude oil prices and the reassuring words from the White House about the Fed.
[Read more about the rally on Wednesday, which yielded a record gain for the Dow Jones industrial average.][Read more about the rally on Wednesday, which yielded a record gain for the Dow Jones industrial average.]
■ Oil prices on Thursday gave back some of their gains from the day before, and shares of energy producers were the worst performers in the S&P 500.■ Oil prices on Thursday gave back some of their gains from the day before, and shares of energy producers were the worst performers in the S&P 500.
■ The drop on Wall Street came after market declines across Europe. The Euro Stoxx 50, a measure of blue-chip European companies, was down 1.6 percent by the afternoon. Britain’s FTSE 100 was off 1.5 percent, France’s CAC 40 had lost 1.3 percent and the Dax in Germany was 2.6 percent lower. ■ Wall Street was sliding after market declines across Europe. The Euro Stoxx 50, a measure of blue-chip European companies, was down 1.6 percent by the afternoon. Britain’s FTSE 100 was off 1.5 percent, France’s CAC 40 had lost 1.3 percent and the Dax in Germany was 2.6 percent lower.
[It’s not just the stock market that’s flashing warnings. The bond market is too.][It’s not just the stock market that’s flashing warnings. The bond market is too.]
■ Asian markets were mixed on the day, with Japan’s Nikkei 225 ending trading around 3.9 percent higher after dipping into bear-market territory — at least 20 percent off its recent peak — earlier in the week. China’s Shanghai Composite Index fell 0.6 percent, Hong Kong’s Hang Seng Index dropped 0.7 percent, South Korea’s Kospi index was flat, and Taiwan’s Taiex rose 1.7 percent. ■ Asian markets were mixed on the day, with Japan’s Nikkei 225 ending trading around 3.9 percent higher after a dip into bear-market territory — at least 20 percent off its recent peak — earlier in the week. China’s Shanghai Composite Index fell 0.6 percent, Hong Kong’s Hang Seng Index dropped 0.7 percent, South Korea’s Kospi index was flat, and Taiwan’s Taiex rose 1.7 percent.