Stocks edge lower as investors reassess Fed fears

May 23, 2013 @ 3:02 pm


Trader John Panin, second left, adjusts his glasses as he works on the floor of the New York Stock Exchange Thursday, May 23, 2013. A global stock market slump is continuing on Wall Street as traders worry about how committed the Federal Reserve remains to keeping up its bond-buying program. (AP Photo/Richard Drew) | Zoom

NEW YORK (AP) - Investors recovered their poise after a shaky start to trading on Wall Street that sent stocks sharply lower.

U.S. markets plummeted immediately after the opening bell Thursday following a global slump prompted partly by an unexpected slowdown in Chinese manufacturing. Concern that the Federal Reserve might ease back on its economic stimulus program sooner than expected had also riled investors.

The dip gave investors who missed this year's stock market surge an opportunity to get into the market, and by midday the market had recouped most of its early loss. Stocks even climbed into positive territory by midday, then ended the day marginally lower.

"Most institutions, most hedge funds and most individuals have watched the market go up without them, so the dips are being bought," said Jim Russell, regional investment director at U.S. Bank. "There's a very strong case for U.S. stocks."

For the most part, the U.S. stock market has been going up steadily since the beginning of the year, with only infrequent declines. Investors' optimism has been stoked by a pickup in hiring at U.S. employers, a recovery in the housing market and record profits at U.S. corporations.

All that has helped push the Dow up 16.7 percent this year. The Standard & Poor's 500 index is 15.7 percent than at the start of 2013.

On Thursday, however, trading was volatile.

The Dow Jones industrial average ended the day just 12.67 points lower, or 0.1 percent, at 15,294.50. It fell as much as 127 points during the first hour of trading.

A sell-off in global markets came after minutes from the latest Fed meeting, released Wednesday afternoon, indicated that several policymakers were leaning toward slowing the central bank's bond-buying program as early as June if the economy continues to recover.

The central bank is spending $85 billion a month buying bonds. That program has been keeping interest rates low in an effort to encourage borrowing, spending and investing. It's also meant to encourage investors to buy risky assets like stocks.

Investors were also unsettled by the report that showed manufacturing in China, the world's No. 2 economy, unexpectedly shrank this month. HSBC Corp. said the preliminary version of its monthly purchasing managers index had dropped to a seven-month low. China's booming economy has been a major driver of global growth in recent years and investors worry when they see signs that it's slowing down.

Stocks fell sharply in Asia Thursday. Japan's Nikkei index dropped 7.3 percent after news was released about the slowdown in Chinese manufacturing. The declines extended to Europe, where Germany's DAX index, which has been at a record high, slid 2.1 percent.

The sell-off looked set to continue when trading opened in New York, but the market quickly hit bottom and reversed course.

Some investors also reevaluated the concern about the Fed easing, or tapering, its economic stimulus program.

Any pullback of the Fed's stimulus should be seen as a positive signal because it would mean that the U.S. economy is getting stronger, said Joe Quinlan, chief market strategist at U.S. Trust.

"When the Fed starts to taper, the fundamentals of the U.S. economy have improved even further than we have already seen," said Quinlan. "The Fed tapering is actually a good story for U.S. equities and the economy."

Encouraging news about the U.S. economy also helped the case for stock market bulls Thursday.

Sales of new homes rose in April to the second-highest level since the summer of 2008, the Commerce Department reported Thursday. Also, the median price for a new home hit a record high, another sign that housing is recovering.

There was good news on the labor market, too.

The number of Americans applying for unemployment benefits fell 23,000 last week to 340,000, a level consistent with solid job growth, the Labor Department said. That suggests employers are laying off fewer workers. The decline in claims has coincided with steady job growth over the past six months.

In other U.S. stock trading, the Standard & Poor's 500 index closed down 4.84 points to 1,650.51, or 0.3 percent. The Nasdaq composite fell 3.88 points, or 0.1 percent, to 3,459.42.

In commodities trading, the price of crude oil fell 3 cents to $94.25 a barrel. Gold rose $24.40, or 1.8 percent, to $1,391.80 an ounce. The dollar fell against the euro and the yen.

In U.S. government bond trading, the yield on the benchmark 10-year Treasury note edged down to 2.02 percent from 2.04 percent. The yield on the note falls when the bond's price rises.

Among stocks making big moves, Ralph Lauren fell $4.37, or 2.3 percent, to $183.69. The apparel seller reported revenue that fell short of what financial analysts were expecting. Sluggish economic conditions and the decision to cut certain businesses reduced sales.

PC maker Hewlett-Packard surged $3.63, or 17.1 percent, to $24.86 after the company delivered second-quarter earnings that topped the estimates of both its own management and financial analysts.

Dollar Tree rose $1.82, or 3.8 percent, to $50.19 after the discount store chain said its earnings climbed 15 percent as customers spent more. The earnings beat the expectations of Wall Street analysts who follow the company.


(Copyright 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.)
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Comments (25)


  • Add A Comment

  • hdcase wrote...
    If this surprises you you're living under a rock.
    August 4, 2011 10:33 am
    Congress needs to do a lot more than raise the spending cap or make so-called cuts, in future years. We need to do what Moody's and Standard & Poors said. Cut 4 trillion now.
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • hnuh wrote...
    Even
    August 4, 2011 10:45 am
    now, the leftists cannot fathom how their ideas DO NOT WORK. They will call economic sabotage, unpatriotic or treasonous behavior, all kinds of snarling and shrieking smears at "the other"... that is, those who produce and invest. The takers are in charge, the makers are trying to protect themselves. The biggest error we have made as a people is embracing the utterly legless leftist philosophy over the last 40 years and allowing ourselves to experience the INEVITIBLE RESULT of socialistic ideas in our economy.
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • Lonestar wrote...
    What's next?
    August 4, 2011 11:13 am
    Each side will blame the other, the gummit will shovel more money into the economy, Al Gore will get richer, and the rest of us will survive on Kraft macaroni & cheese.
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • It's me! Ha ha! wrote...
    Well! I am so relieved to see how well ObamaNomics is working! Just how well all that HOPE and CHANGE is working.
    August 4, 2011 11:16 am
    NOT!

    All this just because the Dear Leader could not make the Republicans look like they caved in his Messiah like presence??? That the Repbublicans were given the Big Win on this! I don't think so!

    This raising of the debt ceiling being raised and the Dear Leader within one day almost hitting that limit, the stock market nose diving? Again, where is all that Hope and Change?

    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • Anton wrote...
    Obamanomics....
    August 4, 2011 12:04 pm
    Yea, it's Obama's fault! He's been in office for 3 years and now the market has just realized that he's there now. And...what's this?... he signed a "health-care" into law?... when did this happen?.... oh!...everybody sell eveything! Or maybe, just maybe, the global economic growth outlook wasn't so hot and started a sell-off.
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • daveismenotyou wrote...
    But Anton
    August 4, 2011 12:13 pm
    We had this great recovery, right?
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • roll wrote...
    ECONOMIC'S
    August 4, 2011 12:18 pm
    anton what do you not understand we increase our limit x2 we decrece our spending x1 we are still going down maby slower but we are going backwards in the red. maby you dont pay your bills on time so you think its ok to spend 2x more than you make. only an idiot would do that oops that is we us USA the only way out is to cut up the card do without
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • HPD 5-0 wrote...
    Yea, it's Obama's fault!
    August 4, 2011 12:43 pm
    Hilarious how when this happens before BO got elected, the leftists screamed "IT'S BUSH'S FAULT!" Now that it's WORSE under their guy's watch, their incredulous that the "Great One" would be blamed. Ah, hypocrisy, thy name is LIBERAL.
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • Lonestar wrote...
    Happy Birthday Mr President
    August 4, 2011 12:50 pm
    You were supposed to blow out the candles - not blow up the economy!
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • It's me! Ha ha! wrote...
    So how is that Summer of Obama recovery going?
    August 4, 2011 1:06 pm
    What does this make? Oh, yea! The third summer of Obama recovery. Where is the recovery? The jobs?

    How is that Hope and Change going for you left wing parrots?

    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • Dmaxx wrote...
    Here's a crazy idea
    August 4, 2011 1:07 pm
    We should probably just print about 8 trillion dollars, and pay everyone off that we owe while we can still do it. It won't be long before the rest of the world refuses to trade in US Dollars, so now might be our last chance.
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • { "Thumbs Up":"1","Thumbs Down":"-1" }