Market Wrap For Thursday, August 15: Stocks Plunge Amid Fears Of Fed Tapering
The major market averages recorded large losses on Thursday as expectations that the Federal Reserve will begin trimming its quantitative easing program as soon as the September FOMC meeting rose in the wake of positive economic data. In a bizarre twist - which is emblematic of the central bank's outsized influence on the market in the current environment - a strong jobs report along with a rise in CPI weighed on investor sentiment and triggered cascading equity prices.
The economic data showed that the jobs market continues to heal and that deflation concerns are receding. Given the improving conditions, it is becoming more likely that the Federal Reserve with begin tapering its bond-buying program in the near-term, which is causing anxiety on Wall Street. Since the financial crisis, the central bank has been adding liquidity to the markets on a near-constant basis and it is unclear how the economy will perform in the absence of this stimulus.
The Dow Jones Industrial Average lost more than 225 points, or 1.47 percent, to close at 15,112.
The S&P 500 fell 24 points, or 1.43 percent, to 1,661.
The Nasdaq shed 63 points, or 1.72 percent, to 3,606 on Thursday.
Initial jobless claims fell to 320,000 for the week ending August 10 compared to 335,000 for the week ending August 3. This was the lowest initial claims reading since October 2007 and came in better than the consensus estimate calling for job losses of 339,000 for the period.
Continuing claims declined to 2.969 million for the week ending August 3 versus 3.023 million for the week ending July 27. This compared to the consensus estimate of 3.000 million continuing jobless claims.
Consumer prices rose 0.2 percent in July versus a gain of 0.5 percent in June. This was in-line with consensus expectations.
Core CPI, which excludes volatile food and energy prices, also gained 0.2 percent for the third month in a row. This was also in-line with the consensus estimate.
Industrial Production and Capacity Utilization
Industrial production was flat for the month of July after rising 0.2 percent in June. The consensus expected a 0.4 percent increase in industrial production for the month.
Capacity utilization declined 0.1 percent in July to 77.6 percent. This was below the consensus estimate which expected capacity utilization to rise to 78.0 percent for the month.
The Philadelphia Fed's Business Outlook dropped to 9.3 in August compared to a reading of 19.8 in July. This was a slightly larger decline than the consensus estimate, which called for a fall to 10.0.
Despite a deep pullback for stocks on Thursday, crude oil prices rose. Late in the day, NYMEX crude futures were up 0.33 percent to $107.20 and Brent contracts had risen 0.83 percent to $111.11. Natural gas registered a gain of 2.57 percent to $3.43 on the session.
Precious metals rose sharply on Thursday. COMEX gold futures climbed 2.39 percent to $1,365.30. Silver contracts added 5.45 percent to $22.98. Copper traded up 0.80 percent on the day to $3.3625.
The entire grains complex rose on the trading session. Corn futures jumped a little less than 4 percent while wheat added slightly more than 1 percent. Movers in soft commodities included a 0.69 percent decline in orange juice concentrate contracts and a better than 1 percent gain for ethanol.
Long-term Treasury prices fell on the day as investors fear that the Federal Reserve is going to cut the pace of its bond-buying at the September FOMC meeting. The iShares Barclays 20+ Year Treasury Bond ETF (NYSE: TLT) fell 1.35 percent to $103.73. Yields rose as prices declined on the day.
Treasury yields were as follows late on Thursday: The 2-Year Note yield was 0.35 percent. The 5-Year Note was last yielding 1.52 percent. The 10-Year Note and 30-Year Bond were yielding 2.77 percent and 3.81 percent, respectively.
The U.S. Dollar recorded a relatively large loss on the session. The PowerShares DB US Dollar Index Bullish ETF (NYSE: UUP), which tracks the performance of the greenback versus a basket of foreign currencies, lost 0.68 percent to close at $21.94.
The closely watched EUR/USD pair climbed 0.66 percent to $1.3347. Other movers included the USD/JPY and the GBP/USD. The greenback fell 0.76 percent against the Yen and the British Pound rose 0.87 percent against the Dollar on Thursday.
Volatility and Volume
The CBOE Volatility Index (VIX) surged on the session as stock prices plummeted. The widely watched barometer of volatility expectations closed up 13 percent at 14.73.
Volume spiked along with volatility. It was the first day in weeks where share volume exceeded the 3-month average. Around 152.7 million SPDR S&P 500 ETF (NYSE: SPY) shares traded hands compared to a 3-month average of 132 million.
Surging precious metals prices helped miners on the day. <storng>IAMGOLD (NYSE: IAG) jumped almost 11 percent on the session.
Other miners that recorded large gains on the day included AngloGold Ashanti Limited (NYSE: AU) and AuRico Gold (NYSE: AUQ). AngloGold added around 9 percent while AuRico closed up better than 8 percent.
Integra Lifesciences (NASDAQ: IART) surged around 10 percent on Thursday after the company disclosed that the FDA has finished an inspection of its regenerative medicine facility based in New Jersey. The agency found that Integra has addressed the issues which were raised in a warning letter to the company.
An upgrade to Outperform at Raymond James helped shares of Martin Midstream Partners LP (NASDAQ: MMLP) rise around 9.50 percent on the session. On Wednesday, the company announced that investment firm Alinda Capital Partners has agreed to acquire a 50 percent economic interest and 49 percent voting interest in Martin Midstream's general partner.
Retailer Kohl's (NYSE: KSS) finished the day up more than 5 percent after the company released its fiscal second-quarter earnings results.
Red Robin Gourmet Burgers (NASDAQ: RRGB) climbed more than 8 percent after the company's second-quarter financial results easily topped consensus estimates.
Networking and IT giant Cisco Systems (NASDAQ: CSCO) declined a little more than 7 percent after the company's fiscal fourth-quarter earnings results and the announcement of an impending large layoff.
A disappointing second-quarter earnings report sent shares of ADR Vipshop Holdings (NYSE: VPS) down almost 14 percent on Thursday.
Biotech firm MannKind (NASDAQ: MNKD) was hit by aggressive profit-taking on Thursday. On Wednesday, the stock jumped sharply after positive news from a late-stage trial of the company's diabetes treatment Afrezza. All of those gains, however, were wiped out during today's session with the stock falling 12.50 percent.
A downgrade at KeyBanc sent shares of Smith & Wesson (NASDAQ: SWHC) down almost 8 percent on the day. KeyBanc lowered the gun maker's rating to Underperform.
Renren (NYSE: RENN) fell more than 11 percent despite reporting a narrower loss for its fiscal second-quarter. A weak outlook for the third-quarter weighed on investor sentiment.
Medical Properties Trust (NYSE: MPW) fell 6.55 percent on the session after the company priced a secondary offering at a 6.2 percent discount to Wednesday's closing price.
Pilgrim's Pride (NASDAQ: PPC) shed more than 11 percent after the company announced plans to shutter its Arkansas-based rendering facility.
Related: Thursday's top financial tweets! </storng>
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