Dow sees biggest drop since September

23 Dec 2015 | Author: | No comments yet »

S&P 500 Falls to 2-Month Low as Stocks Extend Post-Fed Selloff.

U.S. stocks closed lower on Friday for the second straight day, as concerns, ranging from a decline in crude oil prices to the global response to the Federal Reserve’s interest hike, weighed down the market. “It’s a confluence of all the factors: oil prices continuing to run down, the Chinese trying to counteract the dollar and everyone is digesting, globally, what the Fed’s announcement means for emerging markets and everything else,” said J.J. U.S. stocks suffered the biggest two-day retreat in three months, as investors weighed the impact of the Federal Reserve’s interest-rate increase and the prospects for slowing global growth.

But despite today’s selloff, the S&P 500 is on the verge of its 50-day moving average finishing the week back above its 200-day thanks to October’s rebound and the late-summer selloff sliding out of the dataset. The 50-day being above the 200-day is generally a bullish signal, at least short-term, and after 16 of the index’s 22 so-called golden crosses the S&P was higher both three and six months afterward.

While the Dow industrials’ death cross last summer came ahead of August’s slump and proved to be prescient, the Nasdaq Composite didn’t log its own death cross until late September. Volatility was slightly higher than usual on account of “quadruple witching” – the expiry of options on stocks and indexes as well as futures on indexes and single stocks. While higher volume and a pick-up in volatility are not unusual on options expiration day, Randy Frederick, managing director of trading and derivatives for Charles Schwab in Austin, Texas, said Friday’s sell-off appeared to be tied more to the Fed’s move and lower oil prices. More than 12 billion shares changed hands on U.S. exchanges Friday, 71 percent above the three-month average and the most since the height of the summer selloff on Aug. 24. “We had a big rally off of the Fed,” said Troy Gayeski, senior portfolio manager at SkyBridge Capital. “But if equities continue to slide, sentiment may have already flipped to thinking there’s not going to be a Santa Claus rally, let’s de-risk and become more conservative.” Stocks remained under pressure for a second day following the Fed’s first rate increase in nearly a decade.

Declining issues outnumbered advancing ones on the NYSE by 2,013 to 1,074, for a 1.87-to-1 ratio on the downside; on the Nasdaq, 1,813 issues fell and 1,084 advanced for a 1.67-to-1 ratio favoring decliners. With the central bank withdrawing stimulus, even if it’s promised to do so at a gradual pace, investors are growing cautious as earnings and ultimately the economy are left to drive stock prices.

Volume on the U.S. exchanges was 11.85 billion shares, compared to 7.24 billion average for the full session over the last 20 trading days, according to Thomson Reuters data. Equities being stuck in the mud has happened as index members’ earnings and revenue have posted little, if any, growth this year amid impacts including the strong dollar and slumping oil prices. The index has fallen 3.6 percent in December, bucking the historical seasonal trend of gains, and headed for the biggest annual drop since the 2008 financial crisis. Sales and profit growth isn’t expected to return in any significant form until at least mid-2016, and even then increases are liable to be more a factor this year’s low bars as opposed to any substantial increase in business.

While this week’s Fed rate decision removed a measure of uncertainty on financial markets and added to optimism that the world’s largest economy is on firm footing, it did little to allay concern that global growth remains vulnerable to a slowdown in China and a related rout in commodities. Following the central bank’s move on Wednesday, Chair Janet Yellen repeatedly stressed her confidence in the health of the economy and played down concerns that it would be knocked off course by weakness overseas or by the recent tumult in the high-yield bond market. “The Fed hiked, the world didn’t end,” said Ross Yarrow, director of U.S. equities at Robert W. There’s no huge reason for people to be putting money to work between now and the end of the year.” The Chicago Board Options Exchange Volatility Index rose 9.3 percent Friday to 20.70. Citigroup Inc. and Regions Financial Corp. decreased more than 3 percent. “We initially saw financials do well on the (Fed) news, but they subsequently sold off,” said Bernie Williams, chief investment officer at San Antonio-based USAA Federal Savings Bank. “There’s concern on the financials’ exposure to energy and their loans, especially the regional banks.” Consumer staples shares in the benchmark also had their biggest back-to-back slide since August.

Among consumer discretionary companies, CarMax Inc. tumbled 6.4 percent, the most in a year, after the used-car dealer’s quarterly results missed estimates. Disney dropped 3.8 percent, the steepest since Aug. 20, after BTIG Research analyst Rich Greenfield cut his rating on the stock Friday to sell, saying “Star Wars” profits won’t offset larger troubles Disney faces from shrinking subscribers at its ESPN sports network.

Offshore rig owners are suffering from the double whammy of a glut of new vessels entering the market at the same time as falling crude prices force oil explorers to cut spending. Analysts warned that cheap oil and rising interest rates could clip near-term aircraft sales and hamper the strong cash generation that has drawn investors to the stock. The world’s biggest cruise operator rose after saying advance bookings for the first three quarters of 2016 are well ahead of the previous year at slightly higher prices.

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