Stocks slid in a volatile session today, followed the global concerns surrounding the limits of additional stimulus from central banks from around the world. Major indexes fell more than 1 percent after the open but shaved most of the losses by midday to flirt with positive territory, only for the selling to resume towards the session’s end.
The Dow Jones Industrial Average declined 117 points (0.8%) to 15,122, the S&P 500 Index ended lower for a second day, lost 17 points (1.0%) to 1,626, and the Nasdaq Composite tumbled 37 points (1.1%) to 3,435.
Overseas concerns contributed to a rise in global interest rates, which, in turn, fueled the selling of equities. The major indexes dropped early followed the disappointing reaction to the Bank of Japan’s (BoJ) monetary policy decision, where it will maintain its current aggressive stimulus stance, which includes asset purchases. Although no major changes were expected, some were disappointed that the central bank did not offer any measures to combat the recent bond market volatility.
The lack of relevant commentary caused investors to sell bonds and equities in favor of the yen. Also, some caution was seen in regard to the European Central Bank’s bond-buying program as Germany’s constitutional court started a two-day hearing on its legality. Meanwhile, Greece saw its 10-yr yield spike more than 100 basis points after the country was unable to complete the privatization of natural gas producer DEPA.
Financial and energy shares led the way down on the S&P 500. The financial sector ended lower by 1.7% amid losses in all major components. Energy space lost 1.4% while crude oil endured a volatile session. The 10 major sectors of the index closed the day lower but defensives including consumer staples and healthcare fared better. Also of note, the foreign exchange market was active once again with the Japanese yen taking center stage as it strengthened nearly 3.0% to 95.97.
Today’s economic news included the NFIB Small Business Optimism Index which rose 2.3 points in June, its fifth increase in the past six months, to 94.4, the highest level in a year, and slightly below the pre-recession level of 94.6.
Wholesale inventories rose 0.2% in April, in line with the consensus. The ICSC/Goldman Sachs Weekly Retail Chain Store Sales Index fell 2.7% last week, the most since early January. The y/y change pulled back to 2.2% from 4.3%.
Our Trend Tracking Indexes (TTIs) pulled back as well with the Domestic TTI settling at +2.59%, while the International TTI ended this volatile day at +5.42%.
I will update the ETF Model Portfolios, which will be posted early tomorrow morning.
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