Before The Bell
The stock market, which had moved irregularly higher over the first three trading days of this week following a setback to start the often trying month of September, began the latest session sharply to the downside, with the Dow Jones Industrial Average quickly falling more than 300 points on concerns about the slow pace of the economic recovery. This latter worry likely stemmed from the cautionary language used by the Federal Reserve following Wednesday's conclusion of the FOMC meeting.
In its post-meeting statement, the central bank indicated that it was committed to using its full range of tools to support the economy's attempt to fashion a durable recovery. It also suggested that it would be keeping the fed funds rate target near zero percent until 2023. Although equity traders typically favor such low rates, it’s the Fed's thinking--apparently its worry about the slow pace of the projected business recovery, that unsettled investors.
In addition, the trading day brought a pair of key economic releases. On point, an hour before the stock market opened, it was reported that weekly jobless claims had come in at 850,000 for the latest seven-day span. That was a tad below expectations, but was higher than during any week throughout the 2007-2009 recession. At the same time, the Commerce Department issued data showing that both housing starts and building permits had eased somewhat in August from July.
Meanwhile, after that initial dip, the market started to recover and with some seriousness, as the Dow totally erased a 380-point deficit by 11:00 AM (EDT) and would go nominally positive for a brief spell. The Dow then would resume its descent and stay well below the breakeven mark throughout the rest of the session, remaining down by more than 250 points for much of the remainder of the day before seeing some buying during the final half hour.
All told, the blue chips would finish off by 130 points, while the tech-heavy NASDAQ would conclude matters with a 140-point deficit. Still, even with this setback, the Dow remains ahead by almost a percentage point for the week thus far as it strives to break a two-week slide. The S&P 500 Index, also lower on the day, is still ahead by a half of a percentage point for the four days this week. Finally, eight of the 11 major equity sectors were down on the day.
As for the after-market hours, the futures showed little change last evening. Now, in the minutes leading up to this morning's open, the market is suggesting a somewhat higher start to the day's activity, with nice strength indicated in the NASDAQ.
– Harvey S. Katz, CFA
At the time of this article's writing, the author did not have positions in any of the companies mentioned.
