By Anora Mahmudova and Mark DeCambre, MarketWatch
Dow drops triple digits; VIX volatility index jumps
U.S. stocks recovered from their session lows Tuesday afternoon
but remained firmly lower, as weaker-than-expected manufacturing
data in China
(http://www.marketwatch.com/story/chinas-caixin-manufacturing-pmi-slips-again-2016-05-02)
revived worries about global growth and sent investors scurrying
out of the perceived risk of equities.
A surprise interest-rate cut in Australia
(http://www.marketwatch.com/story/dollar-slides-further-vs-yen-aussie-dollar-slumps-after-rate-cut-2016-05-03)added
to global economic jitters.
The S&P 500 slumped 19 points, or 0.9%, to 2,062, with all
of the 10 main sectors trading lower.
"The price action across assets points to a solid risk-off day,
when equities, commodities and resource currencies are all hit at
the same time. But until this selloff continues for a few more
days, we are considering it as a technical correction," said Colin
Cieszynski, senior market analyst at CMC Markets.
Among the sectors, energy and materials led the losses, falling
2.4% and 1.8% respectively, following a sharp drop in oil prices.
Financials also were hit hard, down 1.3%.
"On risk-off days when investors are worried about global growth
the assumption is that the Federal Reserve will refrain from
raising rates. It is common to see financials sell off when
investors think rates will stay lower for longer," said Maris Ogg,
president at Tower Bridge Advisors. Lower rates hurt bank-lending
margins.
Investors piled into Treasurys, sending the 10-year yields
(http://www.marketwatch.com/story/treasury-yields-tumble-to-2-week-low-amid-global-market-jitters-2016-05-03)
down 8 basis points to a two-week low, while the CBOE Volatility
Index jumped 6% to above 15, underscoring fear among traders.
The Dow Jones Industrial Average dropped 141 points, or 0.8%, to
17,749, led by losses in shares of J.P. Morgan Chase (JPM), off
2.3%, and Chevron Corp. (CVX), 2% lower.
Meanwhile, the Nasdaq Composite fell 47 points, or 1%, to 4,770,
a day after scoring its first daily gain in eight sessions.
The losses on Wall Street erased gains from the previous
session, when three benchmarks closed higher on Monday
(http://www.marketwatch.com/story/wall-street-stocks-lined-up-for-moderate-gains-ahead-of-ism-data-2016-05-02),
driven by data showing slow-but-steady economic growth in the
U.S.
"A surprise rate cut by the Reserve Bank of Australia is
probably an attempt to stop their currency from appreciating, but
if all central banks do that, it's a race to nowhere," said
Cieszynski.
The Australian dollar slumped to 74.90 U.S. cents
(http://www.marketwatch.com/story/reserve-bank-of-australia-cuts-cash-rate-to-175-2016-05-03-0485414),
down from 76.68 cents late Monday in New York.
The dollar, however, fell against most other major currencies as
the yen extended its recent gains against the greenback.
Data and Fed speakers: There was little on the economic data
front on Tuesday, with only monthly auto sales among major
releases.
U.S. light-vehicle sales regained momentum last month thanks to
cheap credit, low gasoline prices and rising consumer confidence,
with sales expected to hit a new monthly record high. However, car
sales data didn't help car makers, as General Motors Co.(GM) and
Ford Motors Co.(F) fell more than 1.5%.
Analysts noted that Fed speakers' comments that June meeting
might be a live meeting unnerved some investors. Cleveland Fed
President Loretta Mester said waiting for markets to calm down
before raising interest rates may backfire and just lead to more
volatility. Mester is a voting member of the policy-setting Federal
Open Market Committee this year.
Atlanta Fed President Dennis Lockhart, who is a nonvoter, will
give a speech on the economic outlook and monetary policy in
Jacksonville, Fla., at 7 p.m. Eastern.
Movers and shakers: Energy companies were under pressure as
crude oil prices erased earlier gains and traded below $45 a barrel
again
(http://www.marketwatch.com/story/crude-oil-slammed-13-as-supply-glut-fears-return-2016-05-03).
Among the top S&P 500 decliners were Chesapeake Energy
Corp(CHK) and Southwestern Energy Company(SWN), down 9.3% and 7.2%
respectively.
Pfizer Inc.(PFE) rose 3.2% after the drugmaker's first-quarter
earnings beat forecasts
(http://www.marketwatch.com/story/pfizers-stock-surges-after-results-beat-expectations-outlook-raised-2016-05-03).
Clorox Co.(CLX) jumped 4% after the household products company
beat on profit and lifted its 2016 earnings outlook.
Molson Coors Brewing Co.(TAP) shares rose 1.4% after
better-than-expected earnings.
Other markets: Chinese stocks ended firmly higher
(http://www.marketwatch.com/story/china-stocks-rise-after-president-xi-jinpings-verbal-support-for-market-2016-05-03),
as investors appeared to welcome President Xi's call late last
Friday--after markets had shut--to maintain a "healthy development
of the stock market." Chinese markets were closed for trade on
Monday for a holiday.
Europe markets closed lower across the board
(http://www.marketwatch.com/story/european-stocks-slammed-as-euro-jumps-banks-sag-2016-05-03),
with a strong euro and weak bank earnings zapping investor
confidence.
Gold gave up earlier gains to settle down 0.3% at $1,291.80 an
ounce, with some analysts suggesting profit-taking after days of
gains.
(END) Dow Jones Newswires
May 03, 2016 15:26 ET (19:26 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.