Stock Market News for April 11, 2012

Benchmarks suffered their biggest fall of this year as global financial concerns sparked off concerns among domestic investors. While Europe is back in the news after borrowing costs increased in Spain and Italy, China, reported less-than-expected imports. These concerns not only resulted in the markets’ biggest decline in 2012, the S&P 500 has now suffered the longest and sharpest losing streak of the year. Moreover, the loss came on a day which marks the unofficial start of the earnings season.

Markets not only suffered their biggest percentage drop, this was also the sharpest in terms of points. The Dow Jones Industrial Average (DJI) plunged 213.66 points or 1.7% to end at 12,715.93. The Standard & Poor 500 (S&P 500) declined 23.61 points or 1.7% to finish yesterday’s trading session at 1,358.59. The tech-laden Nasdaq Composite Index crashed 55.86 points or 1.8% and closed at 2,991.22. The fear-gauge CBOE Volatility Index (VIX) jumped 8.4% to leap back over the 20 mark. Reversing the trend witnessed over the past couple of days, consolidated volumes on the New York Stock Exchange, the American Stock Exchange and Nasdaq were 8.18 billion yesterday, significantly higher than last year's daily average of 7.84 billion. Decliners drubbed the advancing stocks on the NYSE by a wide margin; as for 83% of stocks that declined, only 15% stocks managed to move higher. The remaining 2% stocks were left unchanged.

With yesterday’s heavy fall, all of the benchmarks, i.e., Dow, S&P 500 and Nasdaq, have dropped below their key levels of 13, 000, 1,400, and 3, 000, respectively. While the Dow and S&P 500 had already fallen below their respective key levels a few days earlier, the Nasdaq dropped below 3, 000 yesterday. This was the Nasdaq’s fourth fall in five days.

Focusing on the Dow alone, the blue-chip index has now slumped roughly 550 points over its five-day losing stretch. Additionally, Hewlett-Packard Company (NYSE:HPQ) was the only component among the Dow’s 30 components that closed in the green, gaining 0.6%. The leading decliners among the Dow components were Bank of America Corporation (NYSE:BAC), Caterpillar Inc. (NYSE:CAT), Walt Disney Co. (NYSE:DIS), The Home Depot, Inc. (NYSE:HD), JPMorgan Chase & Co. (NYSE:JPM), Exxon Mobil Corporation (NYSE:XOM) and they declined by 4.4%, 3.0%, 2.7%, 2.4% and 2.1% and 2.0%, respectively.

The VIX’s decline over the last quarter had reflected subdued fear in the market. Starting January till end of March this year, the VIX had plunged 32.5%, which also justified the strong quarterly performance. However, the VIX has made robust gains over the last week and is now at 20.39, not very far away from January 2, 2012’s level of 23. Yesterday’s robust gains combined with Monday’s gains of 12.6% has pushed up the 5-day change to a positive 30.4%, and the index is now 12.9% lower year on year. Additionally, this was the eighth-straight day of gains for the VIX, which is also the longest stretch of gains in almost nine years.

There was not much happening at the domestic front and the benchmarks were primarily guided by global concerns. Growing concerns about the region’s financial health prevented investors from betting on risky assets. Starting last week, European concerns resurfaced after Spain’s bond auction received a poor response. Bond yields have gone up incrementally and are now near 6%. Separately, apprehensions about the global economy are also causing investors to stay away from risky assets, which is being reflected in Italy’s higher borrowing costs.

Meanwhile, China reported a less-than-expected rise in imports in March, thereby sparking fears of a slowdown. Imports gained 5.3% in contrary to 8.9% year-on-year gain in exports and the trade surplus moved up to $5.35 billion.

The concerns also overshadowed an encouraging inventories report by the U.S. Department of Commerce. The report stated: “Total inventories of merchant wholesalers, except manufacturers’ sales branches and offices, after adjustment for seasonal variations but not for price changes, were $478.9 billion at the end of February, up 0.9percent (+/-0.4%) from the revised January level and were up 9.3 percent (+/-1.1%) from the February 2011 level”.

The losses came on a day which marked the unofficial start of the earnings season. Post the closing bell Alcoa, Inc. (NYSE:AA) was scheduled to report its results. A few bellwethers will also release their results this week and the list includes Google Inc. (NASDAQ:GOOG), JPMorgan Chase & Co. (NYSE:JPM) and Wells Fargo & Company (NYSE:WFC).