By Anora Mahmudova and Carla Mozee, MarketWatch
S&P 500 has steepest percentage drop since April
NEW YORK (MarketWatch) -- The Dow Jones Industrial Average
skidded more than 300 points Thursday in its biggest one-day drop
in six months, as a combination of earnings, economic news and a
default by Argentina triggered a broad selloff.
Investors weighed the implications of robust economic growth and
signs of rising wage inflation on Federal Reserve policy ahead of
the key monthly jobs report on Friday.
The day's losses mean both the S&P 500 and Dow industrials
suffered their first monthly decline since January.
The S&P 500 (SPX) fell 39.40 points, or 2%, to 1,930.67, its
steepest one-day percentage drop since April, and lost 1.5% over
July. All 10 main sectors dropped more than 1.5% on Thursday, as
the energy and telecom sector stocks lead losses.
The Dow Jones Industrial Average (DJI) dropped 316.99 points, or
1.9%, to 16,563.37, its worst showing on both counts since Feb. 3.
It finished the month 1.6% lower and its performance for 2014
turned negative.
The Nasdaq Composite (RIXF) lost 93.13 points, or 2.1%, to
4,369.77 and fell 0.7% over July.
The implied volatility on the S&P 500, as measured by the
CBOE Vix index and dubbed "Wall Street's fear gauge", jumped 27% to
17.
Kim Caughey Forrest, investment analyst at Fort Pitt Capital,
said there was no single reason that should warrant such a selloff,
making the drop more difficult to explain. "At the same time, we
were surprised to see markets go up in light of all of the
uncertainty and geopolitical tensions. Perhaps, investors finally
caught up with some of the news," Forrest added.
Kristina Hooper, U.S. investment strategist at Allianz Global
Investors, said investors are still assessing
stronger-than-expected economic growth in the second quarter as
well as the Fed's policy statement, both issued on Wednesday, and
are nervous ahead of Friday's jobs report.
"Markets love certainty and right now there is too much
uncertainty about the Fed's trigger points for raising rates.
Instead of looking at one number, such as the unemployment rate,
the Fed is looking at a mosaic of data points. Investors are unsure
what the Fed would consider a tolerable level of higher inflation,"
she said.
On Thursday, weekly jobless claims rose slightly less than
expected a week after hitting a 14-year low. However the employment
cost index rose due to a larger-than-expected increase in wages.
Many analysts watch for wage inflation as a precursor to
inflation.
Investors continued to focus on company earnings and it appeared
that beating consensus estimate by a small amount did not impress
them. Also in the spotlight was Argentina. Standard & Poor's
Ratings Services declared the country in selective default after
talks aimed at a settlement between Argentina and holdout creditors
fell apart late Wednesday.
Corporate news
Among individual stocks, Yelp Inc.(YELP) plunged 11% as
investors focused on a slowdown in growth in Yelp's local-based
advertisers.
Yum Brands Inc. (YUM) shares skidded 4.9% after the company said
illegal activities involving a Chinese supplier have significantly
hurt sales over the last couple of weeks.
Shares in Synchrony Financial (SYF) fell 1% after a giant
initial public offering was priced at $23, near the low end of
expectations. (Read more about the day's notable movers here:
http://www.marketwatch.com/story/whole-foods-gopro-and-tesla-are-stocks-to-watch-thursday-2014-07-31.)
In the commodities market, crude-oil futures (CLU4) fell below
$100 a barrel on bearish U.S. inventory data, while gold futures
(GCQ4) turned lower.
European stocks fell, and Asian equities closed mixed, with
Japan's Nikkei Average ending down by 0.2%.
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