Dow bounces sharply on report that OPEC ready to cut output
Fred Imbert | @foimbert
1 Min Ago
CNBC.com
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U.S. equities fell sharply Thursday as investors digested a massive global sell-off and oil prices fell further.
The Dow Jones industrial average briefly fell 400 points in afternoon trading, as Boeing and Goldman Sachs weighed the most on the blue chips index.
"I think you're in a situation where the market is in deeply oversold levels. ... At some point, it's got to bounce," said Adam Sarhan, CEO of Sarhan Capital. "But make no mistake about it, the overall trend is down."
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The S&P 500 dropped nearly 2 percent, as financial fell about 3 percent. The financial sector was on track for its first five-day losing streak since August. At session lows, S&P briefly broke below its Jan. 20 intraday low of 1,812.29 when it hit 1,810.01.
"There's a chance we break below the 1,800 level, and then the next level to watch is 1,775," said Peter Cardillo, chief market economist at First Standard Financial. "I think we could see a bounce there. Otherwise, we're in trouble."
The Nasdaq composite fell 1 percent, as biotechnology stocks and several technology stocks fell. The index was also less than percent away of entering bear market territory on an intraday basis.
"I think there's just tremendous wealth destruction going on," said Randy Warren, chief investment officer at Warren Financial Service. "Unless sovereign wealth funds are done selling, we're not going to see a respite."
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Overseas markets fell sharply on Thursday, as Chinese H shares falling about 5 percent, while the pan-European STOXX 600 closed 3.68 percent as banks in the region plunged On Wednesday, European banks soared, momentarily halting a massive plunge.
"Investors have become increasingly concerned with [economic growth]," said Kate Warne, investment strategist at Edward Jones. "This represents an opportunity for investors looking past the short-term volatility. We didn't get any news suggesting the global economy is slowing down."
European markets were also surprised by the Swedish central bank cutting rates further into negative territory.
"I'll say this again, the arbitrary desire on the part of the Fed, ECB, BoJ, BoE, Riksbank, and SNB for 2% inflation has truly wrecked havoc on the global economy and has lit major financial instability," Peter Boockvar, chief market analyst at The Lindsey Group said.
The sell-off in global equities sent traditional safe havens surging.
Gold futures for April delivery settled $53.20 to trade at $1,247.80, while U.S. 10-year note yields traded at 1.61 percent. The benchmark note yield also went below 1.55 percent momentarily.
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Europe tanks on global growth fears
A floorhand works on an oil rig in the Bakken shale formation outside Watford City, North Dakota.
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"The central banks have lost control of the situation," said Peter Cardillo, chief market economist at First Standard Financial. "If this continues, there's real trouble ahead."
Investors also kept an eye on falling oil prices, as WTI futures hit their lowest levels since 2003.
In afternoon trading, U.S. crude was $1.03 lower, or 3.7 percent, at $26.42 a barrel.
"If oil can rally, that could lead to a relief rally on Wall Street," Sarhan said.
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WTI prices have fallen sharply but have experienced several volatile sessions.
"As of yesterday, oil has moved 5 percent 24 of the 26 trading days this year," said Art Hogan, chief market strategist at Wunderlich Securities. "That doesn't happen. ... That is more than we would see in an average year."
On the data front, U.S. weekly jobless claims came in at 269,000, below estimates. However, "we're ignoring the fact that there's good news," Hogan said.
U.S. futures fell sharply on Thursday, with Dow futures briefly falling more than 300 points. On Wednesday, stocks failed to hold a rally that lasted most of the session, as the Dow and S&P both closed lower.
"Yesterday we had the perfect setup for a constructive day," Hogan said. "And it all collapsed on us. Oil fell and everyone fell with it."
"Volatility is going to be the norm, not the exception."
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The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, traded near 29, after briefly hitting its highest level since Jan. 20.
"I think we need to see tangible evidence that the fundamentals are improving," said Mark Luschini, chief investment strategist at Janney Montgomery Scott.
The dollar fell 0.4 percent against a basket of currencies Thursday, and has dropped more than 3 percent in 2016.
"The dollar has turned into a trade of disbelief in the efficacy of central bank policy," said Guy LeBas, chief fixed income strategist at Janney Montgomery Scott.
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Fed Chair Janet Yellen testified in front of Congress for the second day, and said: "There is always some chance of recession in any year."
"But the evidence suggests that expansions don't die of old age."
On Wednesday, she said that, if the U.S. economy were to disappoint, the Fed would have to reconsider its rate hike path.
Symbol
Name
Price
Change
%Change
DJIA Dow Jones Industrial Average 15660.66 -254.08 -1.60%
S&P 500 S&P 500 Index 1828.00 -23.86 -1.29%
NASDAQ Nasdaq Composite Index 4254.63 -28.96 -0.68%
The Dow Jones industrial average traded 370 points lower, or 2.3 percent, at 15,578, with Boeing leading decliners and Cisco Systems and Walt Disney the only advancers.
The S&P 500 dropped 36 points, or 1.9 percent, to trade at 1,815, with financials leading all sectors lower.
The Nasdaq plunged 55 points, or 1.3 percent, to trade at 4,228.
Decliners were about five steps ahead of advancers on the New York Stock Exchange, with an exchange volume of 661 million and a composite volume of 3.057 billion as of 1:56 p.m. ET.
On tap this week:
Thursday
Earnings: CBS, KKR, FireEye, AIG, Activision Blizzard
Friday
Earnings: Red Robin Gourmet Burgers, Calpine, Buckeye Partners, Interpublic, Ventas, Brookfield Asset Management
8:30 a.m.: Retail sales; import prices
10 a.m.: Consumer sentiment; business inventories; New York Fed President William Dudley speaks on household debt and credit
*Planner subject to change.
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