MarketView for April 11

Summary

The major equity indexes fell again in a volatile session on Friday, with the Nasdaq closing below the 4,000 mark for the first time since early February. Selling accelerated late in the afternoon, with the biotech and other momentum stocks again leading the Nasdaq sharply lower. JPMorgan's disappointing earnings also gave investors a reason to sell some bank stocks.

For the week, the S&P 500 fell 2.6 percent and the Nasdaq lost 3.1 percent, the largest weekly decline for both indexes since June 2012.

The Nasdaq Composite fell through 4,000 for the first time since early February and many one-time market darlings are now down substantially from records reached only six or seven weeks ago.

JPMorgan Chase fell 3.7 percent to close at $55.30. The stock was the largest drag on the S&P 500 after the bank reported a far weaker-than-expected quarterly profit as revenue from securities trading fell.

The S&P financial index was down 1.2 percent. It was the S&P 500's worst-performing sector. The Nasdaq biotech index fell 2.8 percent after rising as much as 1 percent earlier. The Global X social media index, which includes Facebook and LinkedIn, closed down 2.3 percent. Facebook fell 1.1 percent to $58.53. LinkedIn was down 2.5 percent to end the day at $165.78.

In contrast to the day's sharp downturn, shares of Wells Fargo rose 0.8 percent to $48.08 after the bank reported a 14 percent rise in first-quarter net earnings.

Shares of Herbalife sold off late in the day after the Financial Times reported that the Department of Justice and the FBI had launched a probe into the company. The stock closed down 14 percent at $51.48.

Even with the recent declines, investors appear committed to equities. Investors poured $8.9 billion into stock funds during the week ended April 9, data from Thomson Reuters' Lipper service showed on Thursday.

The latest economic data indicated that consumers felt more optimistic as April got under way. The Thomson Reuters/University of Michigan's preliminary April reading on the overall index of consumer sentiment came in at 82.6, the highest since July, as both current conditions and expectations brightened.

The seasonally adjusted producer price index for final demand increased 0.5 percent last month, the largest increase in nine months, pointing to some pockets of inflation at the factory gate.

Approximately 7.3 billion shares changed hands on the major equity exchanges, a number that exceeded the 6.9 billion share average so far this month, according to data from BATS Global Markets.

Producer Prices Rise Sharply

The Labor Department reported on Friday morning that its producer price index for the month of March recorded its largest increase in nine months, increasing 0.5 percent, as the cost of food and services surged, pointing to some pockets of inflation at the factory gate. The index had been down 0.1 percent for the month of February.

The increase was the largest since June of last year and exceeded Street expectations, which had been for a 0.1 percent gain.

Producer prices excluding volatile food and energy costs rose 0.6 percent, the largest rise since March 2011. The so-called core PPI for final demand had declined 0.2 percent in February.

With PPI now broadened to include services, it will over time track closely the Consumer Price Index. The increase in producer prices could be signaling some pickup in domestic inflation in the months ahead.

Inflation has been running very low, allowing the Federal Reserve to maintain its expansionary monetary to nurse the economy. However, last month, food prices rose 1.1 percent, the largest increase since May, after rising 0.6 percent in February.

Food prices were pushed up by a surge in the price of pork, which saw its largest increase since August 2008. Sausage, deli meat and boxed meat prices rose by the most since August 1980.

Food prices have now risen for a third straight month, in part reflecting a drought in the West. Services for final demand spiked 0.7 percent, the largest gain since January 2010, after falling 0.3 percent in February.

In the 12 months through March, producer prices advanced 1.4 percent. That was the largest increase in seven months and followed a 0.9 percent rise in February.

Another gauge of core producer prices - final demand less foods, energy, and trade services - rose 0.3 percent after ticking up 0.1 percent.

In the 12 months through March, core PPI for final demand rose 1.4 percent after increasing 1.1 percent in February.