Happy October. It was a rough start to the month and the quarter for the stock market, as each of the major US stock indexes fell more than 1%. The Dow lost more than 200 points and the Nasdaq fell 70 points while the Russell 2000, which houses mid and small-cap stocks, officially moved into a correction as it is now more than 10% lower than its most recent highs.
First, the scoreboard:
- Dow: 16,804.71, -238.2, (-1.4%)
- S&P 500: 1,946.16, -26.1, (-1.3%)
- Nasdaq: 4,422.08, -71.3, (-1.6%)
And now, the top stories on Wednesday:
1. It was an ugly day for the markets. Stocks opened lower and the selling relented only slightly in the last hour of trading as the markets got off to a rough start to kick off a new month and the final quarter of 2014. The only sector of the S&P 500 that didn’t see a complete rout was utility stocks. The price of oil fell again on Wednesday after a brief rally following Tuesday’s rout. US Treasury bonds, meanwhile, rallied on Wednesday with the yield on the US 10-year falling to 2.4% and the 30-year falling to 3.11%.
2. The Russell 2000, which houses mid and small-cap stocks, officially fell 10% from its most recent highs, taking the index into correction territory. The S&P 500 still remains about 5% away from a correction, which that index last saw back in 2012.
3. The European Central Bank is set to hold its latest policy meeting on Thursday, and Business Insider’s Mike Bird has the complete preview. The central bank is expected to keep interest rates unchanged, but the market will mostly be looking for additional details from ECB president Mario Draghi regarding the bank’s asset-backed securities purchase program.
4. Ahead of the latest ECB policy announcement, Germany issued 10-year bonds at a new record low yield of 0.94%. This debt sale reflects the declining inflation expectation in Europe, and in comments on Bloomberg TV on Wednesday, hedge fund manager David Tepper said that until Mario Draghi acts, and until there is inflation in the Eurozone, nothing will happen with bonds.
4. US automakers reported September sales on Wednesday, with the pace of sales slowing to an annual rate of 16.43 million vehicles, below expectations for sales to come in at 16.5 million and below last month’s 17.45 million. Among the notable US automakers reporting sales, Chrysler and General Motors reported sales that grew more than expected, while Ford sales fell more than expected.
5. ADP released its latest private payroll report on Wednesday, showing that companies added 213,000 jobs in September, up from August’s revised addition of 202,000 and better than the 205,000 that was expected by economists. Following the report, Ian Shepherdson at Pantheon Macro said: “In one line: Solid, and perhaps suggests upside risk for Friday’s official data.”
6. In addition to ADP’s payrolls report, we also got manufacturing data from both ISM and Markit, as well as construction spending data from the Commerce Department. ISM’s manufacturing report slowed more than was expected by economists, while Markit’s manufacturing PMI remained strong but dropped slightly from August’s reading. Construction spending was also weak, falling 0.8% in August against expectations for a 0.5% increase.
7. Airline stocks were notably weak on Wednesday, with some traders attributing the move in the sector to concerns regarding Ebola. Among the notable losers in the airline space were Delta, American Airlines, and Southwest, which all fell more than 3% on Wednesday. On Tuesday, the CDC confirmed the first case of Ebola in the US, sending shares of a number of drug companies working to make Ebola cures higher, notably Tekmira Pharmaceuticals, which gained 18% on Wednesday. Shares of Lakeland Industries, which makes hazmat suits, also rallied on Wednesday, gaining just less than 30%.