U.S. stocks buck major losses as Asia, Europe indexes are pounded
U.S. stocks reversed steep early intraday losses Thursday following selloffs in Asian and Europe, where continued unrest in Hong Kong, worries over the spreading Ebola virus and renewed fears over slowing global economic growth continue to unravel financial markets.
The Dow Jones Industrial Average, Standard & Poors 500 and NASDAQ erased early losses, squeezing out small gains or narrow losses. The Dow - off 130 points Thursday morning - was up about 50 points later in the day, but slipped 3.66 points to close at 16,801.05. The S&P 500 ended up 0.01% at 1,946.17, narrowly avoiding its first four-day losing streak of the year. NASDAQ stocks rose 8.11 points to 4,430.20.
Investment firm Strategas Research Partners suggested that the "pullback is getting overdone."
"Our best guess is the market is within a few percentage points of putting in some tradeable low,'' says Strategas analyst Chris Verrone.
Earlier, Japan's Nikkei 225 index tumbled 2.6%, France's CAC 40 dropped 2.8%, Britain's FTSE 100 lost 1.7% and Germany's DAX fell 2%.
At all-time highs just two weeks ago, U.S. indexes have been undermined by unexpected concerns, ranging from Ebola and the growing backlash against the Islamic State in the Middle East to lackluster growth in Europe and China. There are also concerns that the long-bull market was ripe for a correction.
"A lot of it is related to global and geopolitical uncertainties, from Russia to the Middle East to Ebola to Hong Kong," says Sung Won Sohn, economics and finance professor at California State University Channel Islands. "All these risks bunched up and hit at the same time."
Wednesday, the Dow plunged 238.19 points (1.4%) to 16,804.71. The S&P 500 dropped 26.13 points (1.3%) to 1946.16 and the Nasdaq composite skidded 71.30 points (1.6%) to 4422.09.The Standard & Poors 500 Index - poised for its first four-day losing streak of 2014 - and other the Dow have fallen below key support levels, while the small-cap Russell 2000 is now off more than 10% from its March all-time high.
"This continues to be a classic market top of importance,'' says Gary Kaltbaum of investment firm Kaltbaum Capital Management. "Tops take time. Tops are a process, not an event. The 2007 top took about 6 months. This one looks to be about the same."
Commodities were also falling again in weakening demand and oversupply. For the first time in 17 months, benchmark West Texas Intermediate crude oil fell below below $90 a barrel in Thursday morning trading, while Brent crude fell to $92.51 a barrel, its lowest levels since June 2012.
Europe's sluggish growth could spell bad news globally, says Todd Schoenberger of J. Streicher Asset Management.
"The spillover impact is real simple -- Europe is China's number one customer, and if one falls the other will, too," he says. "This has a ripple effect on corporate earnings for multinationals, so the fundamental risk is front and center today."
Markets in Hong Kong and China were closed for a public holiday. Pro-democracy protesters in Hong Kong are locked in a standoff with the government.
While health experts agree that the U.S. is not at risk for a large Ebola epidemic like that in West Africa, "the Ebola issue is huge," Schoenberger says. "It's top-of-mind for traders and is clearly impacting sentiment."
Sohn argues that the street protests in Hong Kong could become a more significant worry for financial markets if pro-democracy protests spread to mainland China.
"Then it becomes a China problem and not just a Hong Kong problem," says Sohn. "And if it becomes a China problem, then it becomes a U.S. problem and a global problem" because a political crisis could morph into an economic problem for China.
"If China's economy slows down significantly, it becomes a global economic problem," says Sohn. "China is the world's economic locomotive."
China's growth rate has already slowed to 7.4%.
While a cascade of overseas woes weighs on U.S. markets, some believe the pressures on stocks markets are short-term.
"All of the above was enough to start the quarter on a down note, but I still believe the markets are set to grind higher between now and the end of the year," says U.S. Trust market strategist Joseph Quinlan.
Markets in Europe want to see more stimulus efforts than the European Central Bank delivered Thursday. The ECB left interest rates at record-low levels and also announced it would start buying covered bonds and asset-backed securities to help stimulate Eurozone growth.
But the ECB's moves still disappointed investors, because ECB president Mario Draghi did not take the more aggressive step of laying out a U.S.-style "easy money" program of buying sovereign bonds.
Contributing: AP, Liz Szabo, Kim Hjelmgaard.