Global Markets Swing Lower on Confluence of Bad News
Today's financial recap and tomorrow's financial outlook.
Global markets cratered on a fairly comprehensive set of bad news.
Asian markets came under pressure after the China Securities Regulatory Commission instituted new rules that will limit trading on margin and increase the availablity of shares for shorting. Chinese stocks have been on fire this year with a huge increase in margin lending, and the news put a stop to the bullish action, with futures tumbling sharply in extended trading.
European equities were also weak today as fears over Greece came back to the forefront. Traders are increasingly concerned that Greece will miss a payment to the IMF and leave the European Union. This is driving profit-taking in European markets, many of which are up more than 20% year-to-date
The fear also spread to the European bond market, with the German 10-year bund yield hitting a new low at 0.078%. Some traders believe it could go negative next week. In addition to the Greece tension, the ECB's QE program also continues to put downward pressure on bund yields.
In US markets, things weren't any better.
Industrials General Electrics (GE) and Honeywell (HON) both reported earnings beats and revenue misses, and both stocks sold off. American Express (AXP) was another earnings disappointer, and that stock dropped as well.
In economic news, the Consumer Price Index rose 0.2% in March, missing the consensus of 0.3%. However, the University of Michigan Sentiment Index was a better-than-expected 95.9.
The S&P 500 fell 1.1% to 2081.07, marking the first 1%+ down day since March 24.
In recent days, sentiment indicators like the ISE Index and Investors Intelligence Sentiment Index implied that traders grew a bit complacent, setting the market up for an interim top.
However, even with today's dip, the S&P 500 is still less than 2% off the February 25 all-time high of 2119.59.
The fear quotient rose dramatically, with the VIX rising 11.0% and all sectors down.
Taking a deeper look into equity market action, high-beta groups like biotechnology, social media, and cybersecurity took the biggest hits.
Netflix (NFLX) broke the broader trend, rallying 1.7% as the stock continued to extend after Wednesday's strong earnings report.
The Russell 2000 also stood out on the downside with a 1.7% drop.
Monday's Financial Outlook
At 8:30 a.m. ET, the Chicago Fed National Activity Index will be reported. That is the only US economic data release on the calendar.
However, we will see a number of earnings reports from major companies including Morgan Stanley (MS), Halliburton (HAL), and IBM (IBM).
News out of Greece could also impact the action, and traders will also look to see if foreign markets stabilize ahead of the US open.
Daily Recap Newsletter