Benchmarks ended in the red zone, dragged down by declines in the Technology and Materials sector. Possibilities of further sanctions on Russia intensified selling pressure post mid-afternoon. The day’s initial gains, largely a result of encouraging durable orders numbers, were eroded by the end of the trading session.
The Dow Jones Industrial Average (DJI) fell 0.6% to close Wednesday’s trading session at 16,268.99. The Standard & Poor (S&P 500) dropped 0.7% to finish at 1,852.56. The tech-laden Nasdaq Composite Index plunged 1.4% to 4,173.58. The fear-gauge CBOE Volatility Index (VIX) went up 6.5% to settle at 14.93. Total volume on the New York Stock Exchange was 3.4 billion shares. Advancing stocks were outnumbered by declining stocks on the NYSE. For 33% stocks that advanced, 65% declined.
Selling pressure intensified in the later part of the day following a speech made by U.S. President Barack Obama in Brussels. He cautioned Russia, saying that United States and its European allies would impose further economic sanctions if Russia goes beyond the seizure of Crimea. The sanctions are expected to encompass the energy sector. His speech came despite the positive outcome from the meeting held between Western leaders and their Russian counterparts on Tuesday. Meanwhile, the International Monetary Fund is expected to announce a bailout package of $15 billion for Ukraine.
Technology and Materials sectors also weighed on the broader markets yesterday. The Technology Select Sector SPDR (XLK) dropped 1.2%. Facebook, Inc. (NASDAQ:FB) fell the most among tech stocks. Shares of this social media giant fell 6.9% after it agreed to pay $2 billion to buy two-year-old virtual reality glass maker Oculus VR Inc. Key stocks from the Technology sector such as Apple Inc. (NASDAQ:AAPL), Google Inc. (NASDAQ:GOOG), Microsoft Corporation (NASDAQ:MSFT), Verizon Communications Inc. (NYSE:VZ) and International Business Machines Corporation (NYSE:IBM) slipped 0.9%, 2.3%, 1.4%, 0.4% and 1.2%, respectively.
Separately, the sharp fall in share prices of King Digital Entertainment Plc (NYSE:KING) also dented investors’ sentiment. Shares of the maker of popular ‘Candy Crush’ game plummeted 15.6%.
The Materials Select Sector SPDR (XLB) led the decline among the S&P 500 sectors. The sector fell 1.4%. Top holdings from the sector such as E. I. du Pont de Nemours and Company (NYSE:DD), The Dow Chemical Company (NYSE:DOW), Monsanto Company (NYSE:MON), LyondellBasell Industries NV (NYSE:LYB) and Praxair Inc. (NYSE:PX) decreased 1.1%, 2.4%, 1.3%, 0.8% and 1.3%, respectively. Overall, 9 out of 10 sectors of the S&P 500 ended in the red.
The positive durable goods report had helped benchmarks open higher. According to the US Census Bureau new orders for manufactured durable goods in February increased 2.2%, more than the consensus expectations of a 0.8% rise. However, excluding transportation it increased 0.2% in February. The unfilled orders for manufactured durable goods in February were up 0.3%.
Benchmarks erased early gains that were a result of expectations for additional European and Chinese stimulus measures. The European Central Bank gave strong indications that it would take aggressive steps in the form of negative interest rates and asset purchases to prevent low inflation. Currently, the European Central Bank has kept the refinancing rate at a record low of 0.25% and the deposit rate at 0%.
On Wednesday, some investors expected that Chinese government will take positive steps to counter deteriorating economic conditions. On Monday, the initial or “flash” Markit/HSBC Purchasing Managers’ Index fell to an eight month low of 48.1 in March from 48.5 in February, indicating a possible decline in China’s manufacturing activity for the third straight month. Earlier, reports of larger-than-expected decline in Chinese exports had raised concerns of a slowdown in the world’s second-largest economy.