Stocks finished lower, but way off their worst levels, after a wild session that saw stocks open sharply lower as bond yields fell around the world, oil prices remained at multi-year lows, and several US economic data points came in below expectations. At their lows, stocks were down more than 2% across the board, with the Dow falling as much as 435 points and the S&P 500 losing all of its year-to-date gains.
First, the scoreboard:
- Dow: 16,141.7, -173.5, (-1%)
- S&P 500: 1,862.5, -15.2, (-0.8%)
- Nasdaq: 4,215.3, -11.8, (-0.3%)
And now, the top stories on Wednesday:
1. What a day for the market. Before US stocks opened for trade, the bond market went wild, with yields on the US 10-year Treasury bond falling as low as 1.86% before settling near 2%, its lowest level since June 2013. German 10-year bunds also fell dramatically, falling to 0.75%. US stocks took their lead from markets in Europe, where stock in Germany lost 2.9%, the UK’s FTSE lost 2.8%, CAC in Paris lost 3.6%, and stocks in Italy lost 4.4%. These losses, however, paled in comparison with the declines seen in Greece, which lost 6%.
2. The price of oil settled near $US81.40, losing another 0.5% after Tuesday’s 4% decline that sent crude to its lowest level since late 2012. The decline in oil is also seriously weighing on shares of oil drilling companies, notably midsize companies such as Nabors, Transocean, Concho Resources, and Whiting Petroleum. Even mega-cap oil companies like Chevron, ExxonMobil, and Royal Dutch Shell have seen their shares decline in the face of declining oil prices and broader market weakness.
3. It was a broad sell-off across the board on Wednesday, as seemingly every major risk of the last couple weeks popped up: softening economic data, declining oil prices, and fears of the spread of Ebola. Rich Barry, floor governor at the NYSE, wrote in an afternoon email blast that seven core factors were being blamed for the sell off at the Exchange.
4. Before the market open on Wednesday, three pieces of US economic data disappointed. Retail sales came in worse than expected, with headline sales falling 0.3% against expectations for a more modest 0.1% decline. The latest report on producer prices paid showed that prices unexpectedly fell 0.1% in September against expectations for a 0.1% increase. Additionally, the New York Fed’s latest Empire manufacturing report showed that business conditions plunged more than 20 points to 6.17 from last month’s 27.54 reading, and way below the 20.25 that was expected by economists. Late in the afternoon, a report from Bloomberg said that Janet Yellen affirmed her view that the US economic expansion would continue.
5. Also in economic news, the Federal Reserve’s latest Beige Book report of economic anecdotes showed that the economy is still growing, consistent with the last two reports. Wednesday’s report showed that consumer spending in most districts saw overall growth ranging from slight to moderate, though general merchandisers in New York saw sales that were weaker on balance than prior reports.
6. A second nurse treating an Ebola patient in Dallas contracted the disease, the CDC confirmed on Wednesday. Additionally, the patient flew on a commercial flight from Cleveland to Texas on Monday. On Wednesday, shares of airline stocks took it on the chin again following Monday’s sharp sell-off as concerns that governments could eventually impose travel bans related to Ebola weighed on the sector.
7. HBO announced that it would introduce a stand-alone streaming video service in 2015, and following the announcement, shares of Netflix sold off as investors initially interpreted the service as a direct challenge. After the market close on Wednesday, Netflix shares fell as much as 20% after the company reported that it added fewer domestic subscribers than expected in the third quarter.
8. One of the largest proposed “tax inversion” deals that would have seen Chicago-based AbbVie acquire Irish drug company Shire and redomicile to Ireland could be at risk after AbbVie said it was reconsidering its bid following US moves to curb inversions. Business Insider’s Brett LoGiurato noted that this could be one of the first major wins for the Obama administration in its efforts to stem the tide of inversions. The news sent shares of Shire tumbling, making for an ugly day for hedge fund manager John Paulson, who was in line for paper losses of up to $US782 million, according to Business Insider’s Julia LaRoche.
9. Bank of America reported earnings before the market open on Wednesday, reporting a $US0.01 loss per share against expectations for $US0.09 on revenue of $US21.4 billion. On an adjusted basis, Bank of America earned $US0.43 per share in the third quarter, as the bank took $US5.8 billion in legal charges related to its settlement with the Department of Justice.
10. The US Treasury Department announced that the budget deficit fell to about $US483 billion in fiscal 2014, the lowest under President Obama and almost $US200 billion below last year. This also marks the fifth consecutive year the deficit declined as a percentage of GDP.
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