Retailer, restaurants and even video game shops brought the stock market lower last Wednesday. With there being no good news to drive it up, investors began to grapple with the question with it hovering over financial markets: When will other central banks and the Federal Reserve pull back on their economic stimulus program?
Markets have become highly turbulent in recent weeks, and traders are simply prepping themselves for the time when the central banks in Japan and Europe as well as the Federal Reserve stop pumping money into the financial system.
“There’s nothing concrete out there to turn us around today, so naturally enough, people are back to thinking about the Fed.” says Russell Croft, a co-portfolio manager at Croft Value Fund in Baltimore.
The Dow Jones industrial average fell to a staggering 126.79 points or 0.8% closing at 14,995.23. The Dow had experienced its first 3 days of losses this year, and is actually down 1.7% for this week only.
A fall in the global markets pulled Dow Jones down to 116 points last Tuesday. The selling began right after the Bank of Japan determined not to make any attempts in spurring growth in the third-largest economy of the world. On other trading schedules, Standard & Poor’s 500 index fell 13.61 points down to 1,612.52. All of the 10 industry groups included in the index fell, followed by utility companies and consumer discretionary.
Two of the top-performing stocks in the S&P 500 index are BestBuy and Netflix for this year; however, both of the stocks began to drop due to consumer discretionary companies. BestBuy dropped $1.01 or 4% down to $26.88, Netflix lost 3% or $6.82 dropping down to $207.64, while GameStop fell 3% or $1.13 down to $36.69.
Ever since reaching a record high on May 21st, 2013, the S&P 500 stock market plummeted to an all time low by 3.4%. The very next day Federal Reserve, Chairman Ben Bernanke said that the central bank had decided to reduce its bond buying program during the coming months, if the economy begins to look strong.
Many on Wall Street have begun to believe that the Fed will begin to cut back on the $85 billion bond purchases by the end of its 2 day meeting on Wednesday. That’s one of the major reasons traders are selling Treasuries, sending the 10 year yield from a low value of 1.63% to an all time high of 2.29% this week.
Long-term borrowing rates are still at a historic low, but their recent leap over the past month has actually grabbed the attention of various investors. According to Mark Travis, CEO and president of Intrepid Capital Management, “I think people are starting to pause,” he said. “If rates continue to drift up, it’s probably going to be a headwind for the market.”
Despite the substantial losses, there have been quite a few bright spots. For instance, Cooper Tire & Rubber jumped to 41%, after Apollo Tyres, which is an Indian company, announced that they were planning to buy out the tire maker for a sum of $2.5 billion. Combined the company would become the world’s largest tire manufacturers, amounting to $6.6 billion. Cooper Tire gained $10.10 and rose to $34.66.
The NASDAQ accumulation dropped down 36.52 points to 3,400.43. In the US government market for bonds, the yield on the 10 year Treasury notes leaped up to 2.23% from 2.18%. In commodities trading Gold rose $15 up to $1,392 an ounce, and crude oil rose 50 cent to $95.88 a barrel.