Market indexes dive but pare earlier big losses
Wall Street slashed much of its steep, early losses in late trading Wednesday as bargain-hunters stepped in to buy beaten down stocks and rescue a market threatened with losing 2014's gains. But the broad market finished mostly lower as renewed fears over the slowing global economy, corporate earnings and the spreading Ebola virus rattled already spooked investors.
The Dow Jones Industrial average, which had plunged 460 points, ended down 173 points (1%) to 16,142 in yet another wild day marked by huge market and individual stock swings. The Standard & Poors 500, after an early slump of 3%, ended off 0.8% to 1862. The tech-laden Nasdaq, beaten down 2.6% in morning trading, ended off 0.3% at 4215. A bright spot: the small stock Russell 2000, up 1% to 1072, but still down 11% from a 52-week high.
Wednesday's carnage marked the Dow's fifth straight drop, the S&P 500 closing 7.4% below its Sept. 19 record high and the Nasdaq briefly touching 10% correction mode. Selling pressures began earlier in Europe, where Britain's FTSE fell 1.9% and Germany's DAX and France's CAC 40 sank nearly 3% after Germany lowered its growth projections. Investors were also unnerved by fresh Ebola fears and weaker-than-expected U.S. economic data, including a Commerce Department report that September retail sales fell 0.3%, below consensus estimates.
Volatility, dominate in 15 of the past 22 trading sessions with triple-digit point swings after months of relative calm, gripped sentiment again Wednesday, with the Dow gyrating nearly 600 points. Many investors fled for the safety Treasury bonds, briefly pushing the yield on 10-year notes to 1.85%, lowest since May 2013. Treasuries ended the day yielding 2.14%.
Selling pressure hit a broad array of stocks. Among banking and financial stocks, Bank of America, the most heavily traded stock Wednesday, dropped 4.6% to $15.76. Citigroup, fell 3.5% to $49.68, and JPMorgan lost 4.2% to $55.53.
Airline stocks were roiled by the prospects of curtailed travel due to the spreading Ebola virus, although they bounced back from early losses of 5% or more. United Continental fell 1.4% and American Airlines ended down 0.5%. Among tech stocks, Intel lost 2.7%. Apple fell 1.2% and Microsoft slipped 1%.
Energy stocks, stable in early trading as crude oil prices appeared to stabilize, were roiled again as benchmark Brent crude oil slipped 2% to $83.41 a barrel, another four-year low. West Texas Intermediate crude fell 1.2% to $80.90 a barrel, lowest since June 2012, in early afternoon trading, but ended unchanged at $81.78 a barrel.
Heightened Ebola fears fueled broader selling, says Carmine Grigoli, chief investment strategist at Mizuho Securities USA.
"News of a second health worker contracted Ebola raises questions about the ability of authorities to contain the spread of the virus,'' he said.
"Overwhelmingly bad news is outweighing good news at the moment," says Karyn Cavanaugh, senior market strategist at Voya Investment Management. All the global growth worries are affecting the markets. This is especially the case with Germany, which has taken a rapid turn for the worse. Until now, Germany was propping up Europe. Wednesday's retail sales data was not good, either.
"It's hard to square the drop in underlying sales with the strengthening labor market and the boost to real incomes from lower gasoline prices," said Paul Diggle, an economist at Capital Economics. "As such, we expect sales growth to strengthen again before too long."
Market strategists said news that drugmaker AbbVie was reconsidering a potential $54 billion takeover of rival Shire PLC also rattled the markets.
U.S.-based AbbVie said in a release late Tuesday that recent moves by the U.S. Treasury Department to clamp down on so-called tax-inversion deals might make acquiring Dublin-based Shire less attractive. AbbVie ended up 50 cents (0.9%) to $54.63, while Shire sank 30% to $170.49.
Among the day's bright spots, protective body suit maker Lakeland Industries, up 10% to $23.60 on speculation of increased sales due to Ebola, and protective equipment maker Alpha Pro Tech, up 14% to $8.37.
Short term, a fresh round of corporate earnings reports could reverse the broad market carnage.
"I believe some decent earnings reports, which we are expecting, can help reverse this pattern, " says Christine Short of earnings tracker Estimize.
Estimize forecasts third-quarter earnings for S&P 500 companies to come in at about 9%, which would represent solid growth. Still, Short says improving economic outlook in Europe and China will be needed to support long-term market strength.
Some earnings reports are pointing to disappointments, however. Netflix tumbled 26% to $333.36 in after-hours trading after disappointing subscriber growth, while eBay was off 3% at $48.68 on lower-than-expected third-quarter results.
Sam Stovall, chief equity strategist at S&P Capital IQ, says market selling pressures may not ebb soon.
"I still think the S&P 500 needs to fall by more than 10% to reset its dials," says Stovall. "That would bring the S&P 500 down to 1810."
The S&P 500 has gone more than 36 months without a decline of 10% or more, which is more than double the 18-month average since World War II.
Contributing: Kim Hjelmgaard, the Associated Press