March 28, 2024

Wall Street Tumbles on Central Bank Fears

Stocks were lower on Tuesday after the Bank of Japan failed to take stimulus measures, a move that increased investors’ worries about the eventual decline in central bank support that has bolstered an equities rally.

The Standard Poor’s 500-stock index fell 0.8 percent in afternoon trading, the Dow Jones industrial average lost 0.7 percent and the Nasdaq composite was 0.9 percent lower.

The Bank of Japan kept monetary policy steady at the end of its two-day meeting, holding off on taking fresh steps to calm bond market volatility. Unhappy traders sent the Nikkei down 1.5 percent.

The lack of additional action rattled investors, underscoring worries about what would happen when the stimulus programs eventually go away. At the same time, nervousness remains over when the Federal Reserve may slow its measures, which have been a significant driver of this year’s stock market rally.

“This market has been fed by extremely supportive government policies around the world,” said Richard Meckler, president of the investment firm LibertyView Capital Management in Jersey City. “You’re getting to that period where investors have to recognize that these policies are beginning to wrap up.”

In Europe, the broad FTSE Eurofirst 300 index of top shares, which has shed 5 percent in the previous 12 trading sessions, ended Tuesday’s session 1.2 percent lower.

The news also sent United States Treasury yields higher, with the 30-year yield rising to a fresh 14-month high, according to Reuters data. The long bond last traded down 20/32 in price, with a yield of 3.407 percent.

Shares of Lululemon Athletica slumped more than 16.7 percent after the company’s chief executive said she would step down.

SoftBank said it would raise its offer for Sprint Nextel to $21.6 billion from $20.1 billion. Sprint was up 2.5 percent.

The S.P. 500 is up more than 15 percent since the start of the year, but markets have been bumpier since comments from the Fed chairman, Ben S. Bernanke, last month sparked uncertainty over the central bank’s timeline for slowing its $85 billion a month bond purchase program.

While the Bank of Japan left the door open to taking fresh steps to calm markets if borrowing costs spiked again, it did not appear to assuage investors. “The B.O.J. took some big steps and had some big changes but now that they’ve done that, the market is looking for even more,” Mr. Meckler said.

Seasonality was also playing a part in Tuesday’s weakness as equities tend to have less direction in the summer months, he said.

Shares in the Dole Food Company rose 21.7 percent after Dole received an unsolicited buyout offer from its chief executive.

The Catamaran Corporation climbed 10.3 percent after it signed a 10-year agreement with the Cigna Corporation.

Boeing raised its 20-year forecast for demand, saying airlines will need 35,280 new airplanes worth $4.8 trillion as the world’s fleet doubles. Boeing shares gained 0.3 percent.

Investors will also be watching a hearing by a German court on the legality of the European Central Bank’s bond-buying program.

In currencies, the dollar sank nearly 2 percent, to 96.83 yen, against the a resurgent Japanese currency by midmorning. The sell-off across the peripheral markets supported the euro, which was unchanged against the dollar at $1.3277 as investors retreated into cash.

In the debt market, investors pulled out of the riskiest assets, sending Greek 10-year bond yields up 75 basis points, to 10.22 percent. Portuguese equivalent bonds rose 34 basis points, to 6.59 percent.

The Greek government has failed to find buyers for its state-owned natural gas company, threatening the privatization goal set under the country’s bailout.

Article source: http://www.nytimes.com/2013/06/12/business/daily-stock-market-activity.html?partner=rss&emc=rss

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