US Stocks Tumble On Central Bank Worries
April 04 2012 - 2:20PM
Dow Jones News
Stocks continued their drop, joining a global stock selloff
after a disappointing Spanish bond auction.
The Dow Jones Industrial Average slid 162 points, or 1.2%, to
13037, in midday Wednesday trading. The Standard & Poor's
500-stock index shed 18.5 points, or 1.3%, to 1395, while the
Nasdaq Composite lost 60 points, or 1.9%, to 3053.
Technology stocks led the markets lower. Microsoft and Cisco
Systems were among the worst performers among Dow components.
Financial stocks were also weak. Bank of America and J.P. Morgan
Chase were also among the biggest Dow decliners.
Spain sold just EUR2.589 billion ($3.43 billion) of bonds, at
the bottom of its planned range, and at yields that were well above
previous auctions.
Following the auction, yields on 10-year Spanish government debt
rose to 5.705%, from 5.445% Tuesday, the highest level since Jan.
9. Stocks fell sharply. Germany's DAX index skidded 2.8%, while
France's CAC-40 closed down 2.7%.
Also weighing on sentiment was a revised reading of euro-zone
business activity in March, which confirmed contraction, as well as
a decline in euro-zone retail sales in February.
Meanwhile, the European Central Bank left its main interest rate
unchanged for the fourth straight month, as expected. In a news
conference after the decision, ECB President Mario Draghi warned
that risks to growth remained and any discussion of how and when
the ECB will unwind its unconventional measures to fight the crisis
was premature.
After Spain's bond auction, "I think the global financial
community is out of patience with Spain, and frankly, with Europe
in general for setting expectations at a certain level and
under-delivering," said Jim Russell, chief equity strategist with
US Bank Wealth Management.
Asian exchanges were also broadly lower. Japan's Nikkei Stock
Average slumped 2.3%, its biggest one-day drop since Nov. 10. South
Korea's Kospi Composite shed 1.5%, while China's market remained
closed for a holiday.
The U.S. market selloff has come after the minutes of the latest
meeting of the Federal Reserve rate-setting committee, released
Tuesday, showed little evidence that the central bank was moving
toward further easing.
"A lot of us are scratching our heads, because if things are
strong enough that we don't need stimulus, shouldn't we be
optimistic, not pessimistic? I think the U.S. economy can ride
without training wheels, but clearly some market participants are
afraid of that," said Jerry Webman, chief economist of
OppenheimerFunds.
In U.S. economic news, 209,000 new private-sector jobs were
added in March, roughly in line with expectations for an increase
of 200,000 jobs. The private-sector jobs report is seen as a
preview to the government employment report due Friday. This week,
that government report falls on Good Friday, a day when the stock
market will be closed but bond markets will be open for a half-day.
Separately, a reading on service sector activity in March came in a
touch below expectations.
"I think almost anything would be a suitable catalyst to bring
us down a few percentage points," said US Bank's Russell. "I think
the market was looking for an excuse to pause."
Crude-oil prices fell more than 2% to below $102 a barrel, while
gold prices dropped more than 3% to about $1,616 a troy ounce.
Silver dropped more than 6%. The dollar rose against the euro and
lost ground against the yen. Treasurys rose, sending the yield on
the 10-year note to 2.23%.
In corporate news, SanDisk was the worst-performing stock on the
S&P 500 after the flash-memory company indicated that fiscal
first-quarter revenue outlook and total gross margin would fall
short of projections because of weaker-than-expected pricing and
demand.
Hovnanian Enterprises tumbled after the home builder said it was
selling 25 million shares of common stock to the public and plans
to use some of the proceeds to pay down debt.
General Electric declined after Moody's Investors Service
lowered its credit rating on the blue-chip conglomerate by one
notch to Aa3 and on its financing arm by two notches to A1.
Williams Partners dropped after the company said it planned a
public offering of nine million common units, representing
limited-partner interests, to help fund its acquisition of Caiman
Eastern Midstream.
Yahoo declined after it said it would lay off 2,000 workers and
change its focus after years of flat revenue growth and declining
use of some of its websites.
DDi rallied after the printed-circuit-board maker agreed to be
acquired by ViaSystems Group for about $266.2 million in cash.
-By Alexandra Scaggs, Dow Jones Newswires; 212-416-4125;
alexandra.scaggs@dowjones.com
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