Credit: Shutterstock photoBenchmarks slumped to multi-month lows on Thursday on concerns that a weak Chinese economy would result in a global slowdown. Uncertainty about the timing of a Fed rate hike was another major cause of indexes' downfall. The continuing slump in all prices also dampened investor sentiment. All benchmarks moved into the red for the year as sectors such as technology, consumer-discretionary and healthcare, which have powered growth up to now, experienced a sharp decline.
For a look at the issues currently facing the markets, make sure to read today's Ahead of Wall Street article
The Dow Jones Industrial Average (DJI) slumped 2.1% to close at 16,990.69.The Standard & Poor's 500 (S&P 500) declined 2.1% to 2,035.73. The tech-laden Nasdaq Composite Index closed at 4877.49, falling 2.8%. The fear-gauge CBOE Volatility Index (VIX) spiked 25.5% to close at a six-week high of 19.14. A total of around 8 billion shares were traded on Thursday, higher than the month-to-date average of 6.7 billion. Decliners clearly outpaced advancing stocks on the NYSE. For 83% stocks that declined, 15% advanced.
All major indexes fell below their 200-day moving averages. The S&P 500 declined to its lowest level in six months and lost 1.1% year-to-date. The Dow suffered its highest loss in percentage terms since Feb 3, 2014 and hit its lowest close since October last year, falling below the key 17,000 level. Shares of The Walt Disney Company ( DIS ) lost 6% while Merck & Co. Inc. ( MRK ) declined 4.5%, pulling down the blue-chip index.
The Nasdaq suffered the highest losses among the three benchmarks. The tech-heavy index suffered its sharpest decline in a day since Apr 10, 2014. Shares of Apple Inc. ( AAPL ) lost 2% following a report from Gartner that smartphone sales as a whole had declined in China during the second quarter. The Russell 2000 also slumped below its 200 day moving average, losing 2.5% and closed 9.5% below the high achieved in June.
Fears about China's economy have been heightened by the heavy losses suffered by its benchmark index this week. The Shanghai Composite Index declined 3.4% on Thursday and had lost 8% over the week at that point. Also, the country's commerce ministry revealed on Wednesday that exports could undergo a further decline this year. These negative economic reports have led to investors losing confidence in the economy, leading to a slump in equity markets.
Additionally, the impact of the minutes of the Federal Open Market Committee (FOMC) meeting flowed into Thursday. Policymakers provided no indication about the timing of a possible rate hike, since they "judged that the conditions for policy firming had not yet been achieved." This has led to anxiety over the timing of the rate increase. It has also led a section of market watchers to believe that the Fed is sensing something about the economy which investors have yet been unable to.
Wednesday's massive slump in oil due to an increase in U.S. crude inventories continued to have an impact. However, Price of WTI crude oil recovered marginally, increasing 0.8% to $41.14 per barrel. In contrast, Brent crude declined 1.2% to $46.62 per barrel, moving even further below the level hit on Wednesday.
The bunch of economic reports released was in stark contrast to the prevailing gloomy sentiment. Weekly jobless claims increased to 277,000, notching the fourth consecutive increase. However, the figure has remained under 300,000 for 24 weeks now. This is the longest such period in 15 years and more.
Existing home sales increased by 2% to seasonally adjusted annual rate of 5.59 million in July, outpacing consensus estimate of 5.43 million. This is the highest increase experienced since Feb 2007. This also marked the tenth consecutive month of year-on-year increase as existing home sales rose 10.3% over the same period last year. Additionally, the Philadelphia Fed's business conditions index increased from 5.7 to 8.3 in August. Only the leading indicators index declined 0.2% in July, primarily due to the decline in building permits.
The Consumer Discretionary Sector SPDR ETF (XLY) declined 2.8% and was the biggest loser among the S&P 500 sectors. Key stocks from the sector including The Procter & Gamble Company ( PG ), The Coca-Cola Company ( KO ), Wal-Mart Stores Inc. ( WMT ), Philip Morris International, Inc. ( PM ), Walgreens Boots Alliance, Inc. ( WBA ), Mondelez International, Inc. ( MDLZ ), Costco Wholesale Corporation ( COST ), Pepsico, Inc. ( PEP ) and Colgate-Palmolive Co. ( CL ) declined 0.3%, 0.6%, 0.2%, 0.8%, 1.8%, 2.7%, 1%, 1% and 1.1%, respectively.
The Homebuilders ETF (XHB) was the second highest loser, declining 2.5%%. Key stocks from the sector including Lennar Corporation ( LEN ), DR Horton Inc. ( DHI ), PulteGroup, Inc. ( PHM ), Owens Corning ( OC ), Tempur Sealy International Inc. ( TPX ), USG Corporation ( USG ) and NVR, Inc. ( NVR ) declined 1.2%, 1.7%, 2.3%, 2.3%, 2.9%, 2.8%, 3.2% and 1.3%, respectively. All 10 sectors of the S&P 500 closed in the red.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
DISNEY WALT (DIS): Free Stock Analysis Report
MERCK & CO INC (MRK): Free Stock Analysis Report
APPLE INC (AAPL): Free Stock Analysis Report
PROCTER & GAMBL (PG): Free Stock Analysis Report
COCA COLA CO (KO): Free Stock Analysis Report
WAL-MART STORES (WMT): Free Stock Analysis Report
PHILIP MORRIS (PM): Free Stock Analysis Report
WALGREENS BAI (WBA): Free Stock Analysis Report
MONDELEZ INTL (MDLZ): Free Stock Analysis Report
COSTCO WHOLE CP (COST): Free Stock Analysis Report
PEPSICO INC (PEP): Free Stock Analysis Report
COLGATE PALMOLI (CL): Free Stock Analysis Report
LENNAR CORP -A (LEN): Free Stock Analysis Report
D R HORTON INC (DHI): Free Stock Analysis Report
PULTE GROUP ONC (PHM): Free Stock Analysis Report
OWENS CORNING (OC): Free Stock Analysis Report
To read this article on Zacks.com click here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
