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MarketView
Events defining the day's trading activity on Wall Street
Lauren Rudd
Thursday, March 13, 2014
Summary
The major equity indexes took it on the chin on Thursday on rising
tension in Ukraine, which helped erase earlier gains spurred by
better-than-expected data on retail sales and the labor market.
Selling accelerated after reports U.S. F-16 fighter jets landed at
central Poland's Lask air base on Thursday to take part in military
exercises seen as Washington's gesture of support for its eastern NATO
allies.
Russia said it had started military exercises near the border with
Ukraine, in what is likely to be seen as a show of force in the standoff
with the West over Crimea. Ukraine's acting president said Russian
forces were concentrated on the border "ready to invade," but he
believed international efforts could end Moscow's "aggression" and avert
the risk of war.
German Foreign Minister Frank-Walter Steinmeier said Germany assumes
this weekend's referendum in Crimea will be followed by steps to absorb
the region into Russia, and if there is no change in direction the
European Union will be forced to consider a further, third stage of
sanctions.
In an unusually robust and emotionally worded speech, German Chancellor
Angela Merkel warned of "catastrophe" unless Russia changes course. The
comments reinforced earlier remarks from Merkel, who warned Moscow it
risked "massive" political and economic damage if it refused to change
course on Ukraine.
China's economy slowed markedly in the first two months of the year, as
growth in investment, retail sales and factory output all fell to
multi-year lows.
The CBOE Volatility index VIX rose more than 12 percent to 16.22. The
index usually moves inversely to the S&P 500. The S&P 500 easily broke
below its 10-day and 14-day moving averages, which were acting as
short-term technical support levels. It also broke below the 1,850
level.
Economically-sensitive sectors such as industrials and technology were
the worst performers. General Electric fell 1.3 percent to $25.43, while
Apple lost 1 percent to close at $531.45.
Earlier, gains were supported by better-than-expected weekly initial
jobless claims and retail sales data for February, although the prior
month of retail sales was revised lower.
Import prices increased 0.9 percent last month, their biggest rise in a
year as petroleum soared, but there was little sign of a broad pick-up
in imported inflation.
In the last piece of economic data on Thursday, business inventories
rose 0.4 percent, in line with expectations, but a drop in sales meant
it was now taking the longest time since late 2009 to move goods from
shelves.
Economic Data Continues Rebound
Retail sales rebounded in February and new applications for unemployment
benefits hit a fresh three-month low last week, suggesting some strength
in the economy after harsh weather abruptly slowed activity in recent
months.
The Commerce Department reported Thursday morning that retail sales
increased 0.3 percent last month as receipts rose in most categories.
That followed a revised 0.6 percent drop in January and ended two
straight months of declines. The Street had been looking for a 0.2
percent increase in retail sales in February after snow and ice
blanketed densely populated regions during the first half of the month.
An unusually cold and snowy winter disrupted economic activity at the
end of 2013 and the beginning of this year. However, retail sales are
expected to accelerate in the spring as warmer temperatures and
improving household finances help to unleash pent-up demand.
Retail inventories excluding autos, which factor into the calculation of
GDP, posted their largest gain since last July. That could see
inventories contributing to growth this quarter. Inventories added only
0.1 percentage point to the fourth-quarter growth.
Supporting retail sales last month was a rise in receipts at automobile
and parts dealers. That helped to offset a drop in sales at electronics
and appliance stores. Receipts at building materials and garden
equipment stores were also higher as consumers purchased snow removal
equipment.
Sales at furniture stores rose as did receipts at clothing stores and
online retailers. There were also gains in receipts at sporting goods
shops and restaurants. However, sales at food and beverage stores were
lower.
Meanwhile, the Labor Department reported prior to the opening bell that
initial claims for state unemployment benefits fell by 9,000 claims to a
seasonally adjusted 315,000 claims. It was the lowest reading since late
November. The consensus had been for first-time applications for jobless
benefits to increase by 330,000 claims for the week ended March 8.
The four-week moving average for new claims, considered a better measure
of underlying labor market conditions as it reduces the week-to-week
volatility, fell to its lowest level since early December.
Harsh weather has hurt job growth, but the labor market is starting to
break out of winter's grip. Nonfarm payrolls increased 175,000 in
February.
Rising homes values and stock prices, as well as some uptick in wages,
have left household balance sheets in much better shape since the
recovery started nearly five years ago.
Consumer spending rose at a 2.6 percent annual pace in the
fourth-quarter of 2013, with the overall economy expanding at a 2.4
percent rate during that period.
In a second report, the Commerce Department indicated that business inventories
rose 0.4 percent in January.
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MarketView for March 13
MarketView for Wednesday, March 13