Stocks Erase Red Ink After Steep Selloff
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After sharp losses early Thursday, stocks reversed course as traders reacted positively to comments from Federal Reserve officials.
Today’s Markets
The Dow Jones Industrial Average (INDEXDJX:DJI) fell 24.5 points, or 0.15%, to 16,117. The S&P 500 (INDEXSP:GSPC) rose 0.27 points, or 0.01%, to 1,862. The Nasdaq (NASDAQ:IXIC) gained 2.07 points, or 0.1%, to 4,217.
Thursday marked another volatile day for Wall Street as the Dow swung between positive and negative territory before closing lower for the sixth consecutive day. It was the longest losing streak for the index in 14 months.
During the previous session, the blue-chip index fell as much as 457 points, the steepest drop so far for the year, but recovered most of those losses. Traders jumped into the safe-haven of U.S. Treasury bonds, bringing the yield on the benchmark 10-year note below 2% for the first time in 16 months.
Traders have been on the defensive with the Federal Reserve's massive stimulus program, known as quantitative easing, on pace to end this month. They are keeping a close eye on the Fed and its timeline for raising interest rates, a move that most Fed watchers expect to occur sometime next year.
In a televised interview Thursday, St. Louis Federal Reserve Bank President James Bullard said the central bank should consider delaying the end of its bond-buying program, even though U.S. fundamentals remain strong.
The remarks could be seen as a surprise, given Bullard’s reputation as a fiscal hawk.
“To go from talking about a rate hike to talking about delaying QE is a big change and one that I am not taking lightly,” Michael Block, chief strategist at Rhino Trading Partners, wrote in a research note to clients.
Narayana Kocherlakota, president of the Minneapolis Federal Reserve, said there’s more the Fed can do to combat low inflation and high unemployment. He also repeated earlier comments that an interest-rate hike in 2015 would be “inappropriate.”
Elsewhere, European markets showed red ink in the wake of a report on Eurozone inflation, which fell to a five-year low.
Greece, which helped fuel the Eurozone’s sovereign debt crisis, has returned to the front burner as bond yields surged above 7%. Leaders there have hinted that Greece may exit a bailout program funded by the European Commission, European Central Bank and International Monetary Fund.
“The hope now is that Greece reconsiders and keeps/gets new EU funding,” Block said in a separate research note.
Concerns over the Chinese economy are in focus as well. A report on China’s gross domestic product in the third quarter will be released Monday, and analysts are forecasting a lower reading compared to second-quarter growth of 7.5%. In fact, some economists are bracing for the weakest quarter of GDP growth since early 2009.
In the U.S., first-time unemployment benefit claims dropped 23,000 to a seasonally adjusted 264,000 last week, the lowest level in 14 years. Economists surveyed by Thomson Reuters expected jobless claims would increase to 290,000.
Industrial production in September marked the best gain in nearly two years. According to the Federal Reserve, output rose 1% last month to easily top expectations of a 0.4% gain.
The Philadelphia Federal Reserve’s gauge of manufacturing factory activity in the mid-Atlantic region checked in at 20.7 in October, below September’s 22.5. Wall Street projected a reading of 20.
The National Association of Home Builders said its Housing Market Index climbed to 59 in September from 55 in August, indicating a rosier sentiment among builders.
Fears over the spread of the Ebola virus are also stirring the markets. Dr. Thomas Frieden, director of the Centers for Disease Control and Prevention, appeared at a congressional hearing today.
On the corporate front, Netflix (NASDAQ:NFLX) tumbled 19% after widely missing its own forecast for subscriber additions in the latest quarter.
AbbVie’s (NYSE:ABBV) board officially reversed its recommendation for a merger with Irish drugmaker Shire (NASDAQ:SHPG), citing the U.S. Treasury Department’s new rules that target tax inversions. Shire rallied 4.7%, while AbbVie traded 3.2% lower.
Wal-Mart Stores (NYSE:WMT), the world’s largest retailer, slid 1.8%. The company cut its full-year outlook for sales and warned it will open fewer stores than planned.
In commodities, West Texas Intermediate crude oil rose 92 cents, or 1.1%, to $82.70 a barrel. Wholesale New York Harbor gasoline was up six cents at $2.21 a gallon.