It was another volatile day in the markets. And once again, the momentum stocks got wrecked.
First, the scoreboard:
- Dow: 16,026.7 (-143.4, -0.8%)
- S&P 500: 1,815.6 (-17.3, -0.9%)
- Nasdaq: 3,999.7, (-54.3, -1.3%)
And now the top stories:
- The so-called “internal correction” out of high-priced growth stocks into lower-priced value stocks continued today. Among the big losers today were TripAdvisor, Intuitive Surgical, First Solar, and Netflix.
- Wall Street’s strategists have generally been sanguine about this, but they’re getting a bit more nervous. “So far the equity market sell-off has been concentrated in the U.S., with risk-correlated assets elsewhere doing relatively well,” said Citi’s Steven Englander. “Now there are signals that USA equity risk off is becoming broader risk off, although the signals are still tentative. In particular, the U.S. equity sell-off, which was blown off initially by most equity markets, is beginning to spread both to EM and G10.”
- Before the U.S. markets opened, banking giant JPMorgan announced Q1 revenue and earnings that fell sharply and missed expectations. Areas of weakness included mortgages, where production revenue plunged 76%, and fixed income trading, where markets revenue fell by 21%.
- Here’s JPMorgan CEO Jamie Dimon: “We have growing confidence in the economy — consumers, corporations and middle market companies are in increasingly good financial shape and housing has turned the corner in most markets — and we are doing our part to support the recovery.”
- Things keep getting worse for General Motors and its new CEO Mary Barra. According Reuters, Barra had received an email in 2011 discussing steering problems on models that were later recalled. This appears to be related to GM’s March 31 recall of 1.3 million cars “that may experience a sudden loss of electric power steering assist.”
- According to the Financial Times, the FBI and Manhattan’s U.S. attorney’s office are probing Herbalife, the nutritional product, multi-level marketing company. Herbalife continues to be the target of activist hedge fund manager Bill Ackman, who believes the company is an illegal pyramid scheme with a stock that will eventually go to $US0.
- Meanwhile, the University of Michigan’s preliminary index of April consumer confidence jumped to 82.6 from 80.0 in March. This was stronger than the 81.0 level expected by economists. “The rise in consumer confidence in April reflects a reversal of the earlier weather-related hit to confidence, as well as record high stock markets and improving labour market conditions,” said Capital Economics’ Paul Diggle. “These numbers suggest that consumption growth got off to a decent start in the second quarter.”
- However, Pantheon Macroeconomics’ Ian Shepherdson poured a little cold water on the confidence data. “Before we get too excited, though, note that the index has been at this level or better several times in recent years, only for it then to fall back,” he wrote. But he’s an optimist. “We think the odds this time favour sustained strength, in the absence of fiscal/political chaos and with stable energy prices, though sentiment is vulnerable still to any correction in the stock market.”
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