MarketView for April 15

Summary

Monday saw the major equity indexes chalked up their worst day since November 7, when the market sold off following the U.S. presidential election, as large declines in the price of gold, oil and other commodities fed a broad selloff in equities. In addition, weaker-than-expected data from China sparked the initial decline, but selling accelerated late in the session as reports of two explosions in Boston near the finish line of the Boston Marathon unnerved investors.

Data showed China's annual rate of growth eased back to 7.7 percent from the 7.9 percent rate of the previous quarter and below economists' forecast for an 8.0 percent expansion.

Commodity-related shares led the decline with gold suffering its worst two-day sell-off in 30 years as China's lower than expected GDP data fueled worries about the strength of the global economy in general going forward. The SPDR Gold Shares ETF GLD lost 8.8 percent to $131.31 on record volume.

Total trading volume was the second highest of the year, with about 8.5 billion shares changing hands on U.S. exchanges. The largest declining sectors were energy and materials. The S&P energy sector index lost 3.9 percent, while the S&P materials sector index was down 3.9 percent.

Exxon Mobil chalked up a 2.8 percent decline to end the day at $86.49, thereby leading the S&P 500's decline.

Shares of Freeport-McMoRan Copper & Gold ended the day down 8.3 percent to close at $29.27.

Dish Network fell 2.3 percent to $36.77 after the satellite television provider offered to buy Sprint Nextel for $25.5 billion in cash and stock. Sprint ended the day up 13.5 percent to close at $7.06. The offer could thwart the proposed acquisition of Sprint by Japan's.

Among the day's gainers, Citigroup edged up 0.2 percent to $44.87 after reporting a higher-than-expected gain of 31 percent in first-quarter profit.

First-quarter reports are expected to show only a small year-over-year gain in overall earnings since growth has slowed in recent quarters. S&P 500 earnings growth is estimated at 1.7 percent, based on results from 34 companies that have reported results so far and estimates for the rest, as indicated by data from Thomson Reuters.

Gold Tumbles

Gold chalked up its largest two-day drop in 30 years on Monday as oil, copper and grains prices also fell after disappointing Chinese economic data increased worries over global growth. Moreover, there appeared to be growing caution once again that the world economy is headed for another recession.

Commodities-linked currencies such as the Australian and New Zealand dollars declined more than 1 percent against the dollar, weighing further on energy, metals and crop prices.

The 19-commodity Thomson Reuters-Jefferies CRB index, a globally watched indicator, fell two percent and headed for its sharpest one-day loss since mid-September. The index hit its lowest level since the end of June.

Gold, which fell five percent on Friday, was down nearly 8 percent on Monday, sliding deeper into bear territory. The precious metal's spot price fell over $30 in a matter of minutes at one point, breaching support at $1,400 per ounce. The sharp selloff in gold came as an "unexpected event" to many hedge funds.

Oil fared scarcely better than gold, sliding nearly 3 percent. Other precious metals were caught in the downdraft, with silver briefly dropping 10 percent. Industrial metals plummeted, with copper at its lowest price in over a year. At the same time, wheat led the decline in grains, falling nearly 3 percent. In other crops, Arabica coffee hit a near 3-year low.

Both oil and gold have been under substantial selling pressure since last week. Bullion has come off the most, shedding around 9.5 percent since last Monday's close, while crude has lost about 3.5 percent. A variety of factors sent gold tumbling, including a proposed sale of Cypriot gold holdings, and more fund-based investors headed for the exits after China's data on Monday.

China's economy grew 7.7 percent in the first quarter, undershooting market expectations for an 8.0 percent expansion dashing hopes that the world's second largest economy would rebound after posting its weakest growth in 13 years in 2012.

The weaker-than-forecast GDP number was backed by slower increases in China's industrial production and fixed-asset investment, despite strong lending growth in March. Besides being the world’s second largest economy, China is the largest buyer of industrial metals and many other commodities. In reaction, the benchmark three-month copper contract in London fell to its lowest level in 1-1/2 years to $7,085 a ton, while aluminum hit a 3-1/2 year low.

Brent crude oil sank below $101 a barrel to a nine-month low and was threatening to break below $100 for the first time since early July. It was down about 15 percent from this year's peak of $119.17 reached in early February. Note that the International Energy Agency, the U.S. Energy Information Administration and the Organization of Petroleum Exporting Countries had already lowered their global oil demand growth for 2013.

Aside from worries over the economy, investors were also spooked by thoughts that the Fed may soon begin to bring to a close its bond-buying program that has supported commodity and stock prices for over two years now. The Fed started the stimulus action to help the economic recovery after the financial crisis.

Minutes of the U.S. Federal Reserve's March policy meeting released last week showed some officials keen on ending the stimulus this year, though the minutes predated last month's poor non-farm payrolls data and Friday's weak retail sales.