Broadgate: Market News 12/6
12 June 2013
Stocks slid in a volatile session on Tuesday after Japan’s central bank disappointed equity markets by holding its monetary policy steady.
Major indexes fell more than 1 percent after the open but shaved most of the losses by midday, only for the selling to resume towards the session’s end. However, overall volume was average.
Financial and energy shares led the way down on the S&P 500. The 10 major sectors of the index closed the day lower but defensives including consumer staples and healthcare fared better.
The decision by the Bank of Japan roiled various markets as trades built around central bank support of major economies have begun to unwind in the past weeks. Benchmark U.S. Treasury yields briefly approached 2.3 percent, the highest in 14 months, and equities dropped globally, while the yen posted its strongest day against the U.S. dollar in more than 2 years.
Investors in U.S. markets have become more nervous in recent weeks over when the Federal Reserve may slow its accommodative measures, which have been a pillar of the S&P 500’s gain of 14 percent so far this year.
“A lot of what has fueled the rally in equity indexes has been a combination of improvement in earnings and the economy, but in the background there was always the idea that easy money was helping elevate asset prices,” said Kevin Caron, market strategist at Stifel, Nicolaus & Co in Florham Park, New Jersey.
“We are now hearing from various central banks it is possible that expectations for the future are needing to be dampened down a little,” he said. “By not following through with more substantive easing, the BOJ adds to this, and weaker equity markets around the world are reflecting this unease.”
The Dow Jones industrial average fell 116.57 points or 0.76 percent, to 15,122.02, the S&P 500 lost 16.68 points or 1.02 percent, to 1,626.13 and the Nasdaq Composite dropped 36.82 points or 1.06 percent, to 3,436.95.
The Bank of Japan in April announced a $1.4 trillion stimulus program, and while it left the door open to more action if borrowing costs spike, the lack of additional measures to curb recent volatility in the bond market rattled trading.
The S&P 500’s steady climb so far this year has gotten bumpier since comments from Fed Chairman Ben Bernanke last month sparked uncertainty over the U.S. central bank’s timeline for slowing its $85 billion a month bond purchases.
Among individual companies, shares of Lululemon Athletica slumped 17.5 percent to $67.85 after the company’s chief executive said she will step down once a replacement is found.
Dole Food Co jumped 22.2 percent to $12.46 after the company received an unsolicited buyout offer from its chief executive.
U.S.-traded shares of pharmacy benefit manager Catamaran Corp jumped 11 percent to $53.99 as at least six brokerages raised their price targets on the Canadian company after it signed a 10-year agreement with health insurer Cigna Corp.
SoftBank Corp said it agreed with Sprint Nextel Corp to raise its offer for the U.S. wireless carrier to $21.6 billion from $20.1 billion. Sprint was up 2.4 percent at $7.35.
Volume was roughly in line with the 6.38 billion shares traded daily on the New York Stock Exchange, the Nasdaq and NYSE MKT so far this year.
Decliners outpaced advancers by 6.6 to 1 on the NYSE and by 2.8 to 1 on the Nasdaq.
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