Market Update & Important Indicators
U.S. stocks dropped Tuesday, wiping out Monday's gains in another sign that the nearly three-month rally could be on shaky ground. After losing 11% in the first roughly six weeks of the year, the S&P 500 bounced back just as quickly. But as gains taper off, investors have become largely ambivalent about stocks, and any cracks in global economic growth can spur a pullback, analysts said.
Tuesday's declines followed a renewed fall in oil prices, a drop in Chinese manufacturing and signals that eurozone growth this year will be weaker than previously forecast. Traders said the slump in stocks was exacerbated by low trading volumes. "Nothing is adding confidence to the health of the global economy," said Kenny Polcari, director at brokerage O'Neil Securities. He added Tuesday's selling represented a breather as shares have approached records. On Monday, U.S. stocks posted their biggest one-day advance in more than two weeks, putting the Dow industrials and the S&P 500 within 2.3% of their highest levels hit last May.
European stocks closed sharply lower, logging its worst three-day decline in nearly three months as the euro hit a roughly nine-month high against the U.S. dollar. Selling in bank shares following poor financial results in the sector also weighed. The Stoxx Europe 600 fell 1.7% to 335.56, ending at the lowest close since April 12, according to FactSet data. No sector was higher, and basic materials , oil and gas and financial shares fell by most. Losses for the European stock benchmark were the worst since the three-session period ended Feb. 9, according to Dow Jones research.
Most Asian shares rallied Tuesday, with China rising on fresh confidence in Beijing's stated support of its stock markets. In China, the Shanghai Composite Index closed up 1.9%, while the smaller Shenzhen Composite Index rose 2.9%. Markets resumed trading after being closed Monday. Analysts attributed the gains to Chinese traders who were encouraged by President Xi Jinping's after-market hours call late last Friday to maintain a "healthy development of the stock market." Shares of Chinese consumer staples, health care and IT stocks led mainland markets higher. Shares of NanJing Pharmaceutical Co. jumped 7.6%. In Hong Kong, investors were more dismayed by the weaker data than mainland investors, analysts said. Energy, financial and property shares dragged the benchmark Hang Seng Index 1.9% lower, in contrast to the gains in Shanghai and Shenzhen markets. Elsewhere in Asia, Korea's Kospi was up 0.4%. Shares slipped briefly after data in the morning showed the consumer price index rose 1% in April from the year before as the decline in oil prices capped inflation below the 2% target.
An interest rate cut and a rebound in bank stocks on Tuesday helped drive Australia's share market to its highest point in more than six months. In the sharpest one-day gain since early February, the S&P/ASX 200 climbed 110.8 points, or 2.1%, to 5353.8. It marked the highest close for the index since Oct. 28.
The London Metal Exchange's three-month copper contract was down 2.6% at $4,921 a metric ton at the PM kerb close. Among the other base metals, aluminum was down 3.2% at $1,616 a ton, zinc was down 2.3% at $1,890 a ton, nickel was up 0.8% at $9,479 a ton, lead was down 2.2% at $1,765.50 a ton and tin was up 0.3% at $17,303 a ton.
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