Fading Fed Hopes, Worrisome Data Wallop Wall Street
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The markets sustained heavy selling on Thursday as traders who were confronted with grim global manufacturing data questioned whether the Fed will take action to reinvigorate the economy.
Today's Markets
The Dow Jones Industrial Average fell 115 points, or 0.88%, to 13057, the S&P 500 dipped 11.4 points, or 0.81%, to 1402 and the Nasdaq Composite slumped 20.3 points, or 0.66%, to 3053.
The Dow took its biggest fall since late July, closing in the red for the fourth day in a row. The worst performing blue chip was Hewlett-Packard (NYSE:HPQ), which on Wednesday posted mixed earnings and a subdued forward outlook. Other laggards included Boeing (NASDAQ:INTC), Intel (NASDAQ:INTC) and Alcoa (NYSE:AA). Kraft (NYSE:KFT) and Pfizer (NYSE:PFE) were the only two Dow components to close in the green.
Looking at the broad markers, there were more than three shares traded in declining shares for each in an advancing share. Materials stocks took the biggest hit, followed by utilities, energy and technology players.
There were a slew of data reports on the day on many of the world's biggest economies.
Data Deluge
New claims for unemployment benefits rose last week to 372,000 from an upwardly revised 368,000 the week prior, the Labor Department said. Claims were expected to fall to 365,000 from an initially reported 366,000.
The Markit Flash U.S. Manufacturing PMI rose to 51.9 in August from 51.4 in July, the first monthly increase in five months. Readings over 50 point to expansion while readings below 50 indicate contraction.
Sales of new single-family homes rose 3.6% in July from June to an annualized rate of 372,000 units, according to the Commerce Department. Analysts were expecting an annualized rate of 365,000 units. Still, sales are 25.3% from the year before, representing significant gains for a market that is still struggling with high inventory and stubbornly tepid demand.
Meanwhile, the manufacturing sector in China contracted at the swiftest pace in nine months, according to a report from HSBC. New export business, which is a gauge of external demand, declined the most since March 2009 in yet another sign that even the world's second-biggest economy isn't immune to waning global demand.
"Chinese producers are still struggling with strong global headwinds," Hongbin Qu, the bank's chief economist for China said in the report.
"To achieve the stated policy goal of stabilizing growth and the jobs market, Beijing must step up policy easing to lift infrastructure investment in the coming months."
The manufacturing sector in the eurozone shrank for the seventh month in a row in August, but at a slower pace than the month before. The bloc has struggled as the debt crisis has cascaded from periphery nations into core ones like Spain and Italy.
Minutes released Thursday from the Federal Reserve's last policy-setting meeting showed members of the FOMC actively considering taking new stimulus measures to boost the sagging U.S. economy. Among the items considered were a large-scale asset purchase program, which could equate to QE3, or extending the central bank's low-rate pledge.
"If there was any doubt about how close the FOMC is to easing, the minutes to the most recent meeting should dispel those concerns," Dan Greenhaus, chief global strategist at BTIG wrote in an e-mail following the minutes.
Oil futures sold off. The benchmark crude oil contract traded in New York fell 99 cents, or 1%, to $96.27 a barrel. Wholesale New York Harbor gasoline gained 0.37% to $3.116 a gallon.
In metals, gold soared $32.30, or 2%, to $1,673 a troy ounce.
Foreign Markets
The Euro Stoxx 50 dropped 0.96% to 2429, the English FTSE 100 climbed 0.04% to 5777 and the German DAX sold off by 0.97% to 6950.
In Asia, the Japanese Nikkei 225 advanced 0.51% to 9178 and the Chinese Hang Seng jumped 1.2% to 20132.