Stocks Plunge Again (Wednesday): 'The Market Is Extremely Bearish'
New York (Jan 14) Stocks got hammered again yesterday, pushing the already beleaguered market even further into correction territory. The S&P 500 skidded 2.5%, falling below the key level of 1900, while the Dow Jones Industrial Average slid 2.3%, and the Nasdaq fell 3.4%. All indexes were in correction market territory with the S&P 500 down 11% from its 52-week high and the Dow down 13%.
The declines would have to reach 20% to qualify officially as a bear market, but that distinction didn't seem to matter to investors.
"The market is extremely bearish right now," Craig Erlam, senior market analyst at Oanda, told TheStreet. "U.S. stocks are going to have a rough ride in the first quarter and oil is, of course, in for more shocks ... Risk appetite is going to be fairly low for the first few months of the year."
An unexpected build in crude inventories ruined a rebound on commodity markets. West Texas Intermediate crude oil closed just 0.1% higher to $30.47 a barrel after rallying more than 3% Wednesday morning. Crude oil stocks increased by 200,000 barrels in the week ended Jan. 8, according to the Energy Information Administration.
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Crude prices fell briefly below $30 on Tuesday for the first time since December 2003. Commodities have been testing new 12-year lows in the past week as oversupply concerns persisted.
"The fundamentals are strongly against oil at this stage and we're still seeing this oversupply story," added Erlam. "Even if we see production in the U.S. drop off further, it's only slightly below the highest level we had in the middle of last year."
Energy stocks were among the worst performers on markets as investors prepared for further downside to commodity prices. Williams Cos. (WMB - Get Report) , Energy Transfer Equity (ETE - Get Report) , Tesoro (TSO - Get Report) and NGL Energy Partners (NGL - Get Report) were some of the biggest losers, while the Energy Select Sector SPDR ETF (XLE) tumbled 3.2%.
High-momentum tech names were also sharply lower, led by losses in Amazon (AMZN) and Netflix (NFLX) . Microsoft (MSFT) , Oracle (ORCL) , Baidu (BIDU) and Intel (INTC) were also lower, while the Technology Select Sector SPDR ETF (XLK) fell 2.4%. The consumer-discretionary sector, which includes a number of tech names, fell 3.1%, its biggest percentage decline since August.
The U.S. economy continued to grow at a modest pace, according to the latest "Beige Book" released by the Federal Reserve. The Beige Book, an anecdotal collection of conditions in the 12 Fed districts, noted growth in consumer and housing sectors, while manufacturing, agricultural and energy sectors continued to lag.
U.S. stocks suffered their worst first week to a year in history last week as fears over Chinese economic weakness spooked Wall Street and global markets. China's Shanghai Composite fell more than 10% last week.
General Electric (GE) will reportedly cut 6,500 jobs, 600 in the U.K., following its acquisition of Alstom's power business. GE acquired the energy business of France's Alstom last year for $9.2 billion. Shares were slightly higher.
Separately, GE confirmed plans to move its global headquarters to Boston. The company said it will see no material financial impact from its move from Fairfield, Connecticut.
Ford (F) shares fell 5.3% despite expectations of record pretax profit in 2015. The company also declared a supplemental dividend of $1 billion to be paid to shareholders alongside its regular dividend. The automaker said it had decided to reward shareholders after six consecutive years of strong results.
General Motors (GM) jumped 2.5% after boosting its 2016 profit outlook and hiking its quarterly dividend by 6%. The automaker expects full-year adjusted profit between $5.25 and $5.75 a share, up from previous guidance of $5 to $5.50. The board also authorized a new stock repurchase program worth $9 billion through 2017.
MetLife (MET) jumped after announcing plans to sell or spin off its U.S. retail business into a separate entity. The insurance company said it believes the independent new U.S. life insurance company would compete more effectively and allow MetLife to benefit from reduced capital requirements. It said the potential stand-alone business would have about $240 billion in total assets and represent about 20% of its operating earnings.