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Benchmarks ended lower on Thursday as investors feared sooner-than-expected rate hikes. Incidentally, the concerns emerged after the day’s mixed economic reports on fourth quarter GDP and weekly unemployment benefits. Declines in financial and technology stocks also dragged the markets lower.  Eventually, the S&P 500 fell below the key technical level of 1,850 and the Nasdaq dropped to its lowest point in six weeks.

For a look at the issues currently facing the markets, make sure to read today’s Ahead of Wall Street article
 
The Dow Jones Industrial Average (DJI) dropped a meager 0.03% to close Thursday’s trading session at 16,264.23. The Standard & Poor 500 (S&P 500) was down 0.2% to finish at 1,849.04. The tech-laden Nasdaq Composite Index finished at 4,151.23, down 0.5%. The fear-gauge CBOE Volatility Index (VIX) fell 2.1% to settle at 14.62. Total volume on the New York Stock Exchange was 3.7 billion shares. Advancers outran the decliners on the New York Stock Exchange as for 52% advancers, 45% stocks finished in the red.
 
According to the “third estimate” by the Bureau of Economic Analysis, the fourth quarter output of goods and services produced by labor and property located in the United States increased at an annual rate of 2.6%. This was lower than the consensus estimate of 2.7%, but higher than the “second” estimate that pegged GDP growth at 2.4%. 
 
Separately, the U.S. Department of Labor reported yesterday that the advance figure for seasonally adjusted initial claims dropped by 10,000 to 311,000 in the week ending March 22. The drop was in contrast to the consensus estimate of a rise to 322,000. This drop in application for unemployment benefits touched the lowest level in four months.
 
However, economic data gave rise to concerns that the Federal Reserve would raise key lending rates sooner than expected. Earlier, Federal Reserve Chairwoman Janet Yellen had commented that interest rate hikes might happen in about six months after the end of the economic stimulus plan.  She had said that the quantitative easing program is expected to end this fall.
 
The report on pending home sales was also disappointing. The National Association of Realtors reported that Pending Home Sales Index, a forward looking indicator based on contract signings, dipped 0.8% to 93.9 in February. This was in line with consensus expectation of a drop by 0.8%. Pending Home Sales Index has now touched its lowest level since October 2011. Low inventory, declining affordability and harsh winter weather were cited as the prime factors for the slow growth.
 
Markets’ second-consecutive day of losses was also due to losses in the financial and technology sectors. The Financial Select Sector SPDR (XLF) led the decline among the S&P 500 sectors. The sector fell 0.5%. Citigroup Inc. (NYSE:C) fell the most among the financial stocks as it dropped 5.4%, its biggest daily decline since Nov 2012. The shares of the financial behemoth plunged after Federal Reserve rejected the bank’s plea to raise its share buyback program to $6.4 billion and quarterly dividends to 5 cents.
 
Other major stocks from the financial sector such as Bank of America Corporation (NYSE:BAC), U.S. Bancorp (NYSE:USB), American International Group, Inc. (NYSE:AIG) and MetLife, Inc. (NYSE:MET) decreased 0.9%, 1%, 0.6% and 2.3%, respectively.
 
The Technology Select Sector SPDR (XLK) decreased 0.4%. Key stocks from the sector such as Apple Inc. (NASDAQ:AAPL), Google Inc. (NASDAQ:GOOG), Microsoft Corporation (NASDAQ:MSFT), International Business Machines Corporation (NYSE:IBM) and Cisco Systems, Inc. (NASDAQ:CSCO) fell 0.4%, 1.6%, 1.1%, 1.5% and 1.3%, respectively.

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