Stock Market News for April 8, 2010 - Market News

Investors sold stocks and sent broader indices lower on an otherwise listless day after a senior Federal Reserve official said policy makers should not keep interest rates exceptionally low for too long.  Prospects of higher interest rates unsettled traders.

With no immediate solution to Greece’s financial turmoil in sight, the lone dissenting voice of Kansas City Fed President Thomas Hoenig compounded traders’ worries.  Hoenig noted the Fed could move interest rates toward 1%.  However, New York Fed President Dudley noted unemployment concerns would necessitate exceptionally low rates for "an extended period."

The Dow Jones industrial average, which was within striking distance of 11,000 earlier this week, shed some weight and closed below 10,900.  The broader S&P 500 index retreated 0.6% to close at 1,182.45.  The tech-laden Nasdaq, off 0.2%, was relatively a better performer.  After closing at a two-an-a-half year low on Tuesday, the CBOE Volatility Index, the market’s measure of volatility, gained 2.4%.  The yield on the benchmark 10-year notes fell to 3.63% as an auction of $21 billion in 10-year notes witnessed strong demand.  The Treasury is scheduled to auction $82 billion in notes this week. 

A pullback in oil prices weighed on energy shares.  A government report showed weekly crude stockpiles increased last week for the tenth week, its longest run in five years, sending inventories to 17-month highs. Exxon Mobil (NYSE:XOM) dropped 0.8% and Chevron (NYSE:CVX) closed down 0.7%.  A 19% drop in quarterly earnings at agriculture giant Monsanto (NYSE:MON) also weighed on stocks.

The declines were broad based yesterday with only six of the thirty DJIA components recording gains for the session.  Alcoa (NYSE:AA), which kicks off the earnings season next week, dropped 1.9%.  According to FNR Capital, Alcoa’s results may not demonstrate "blowout" returns.  A Fed report, which showed consumer borrowing fell at a 5.6% annual rate in February to $2.448 trillion sent shares in American Express (NYSE:AXP) down 1.7%.  Verizon (NYSE:VZ) fell 1.6% after the company’s CEO on Tuesday noted a proposal to increase broadband access could result in regulatory "overreach." Shares in Caterpillar (NYSE:CAT) dropped 1.3%, Merck (NYSE:MRK) fell 1.2%, with Hewlett-Packard (NYSE:HPQ) and JP Morgan (NYSE:JPM) both declining 1.1%.

All ten S&P500 industry groups ended the session in the red, with telecommunications shares, off 2.3%, leading the decliners. Oil and gas shares plunged 1.0%, utilities dropped 0.9%, consumer goods 0.7%, industrials 0.6%, financials 0.6%, consumer services 0.5%, health care and basic materials 0.4%, and tech shares ease 0.1%.

Escalating Greek default fears sent the US dollar up 0.2% against a basket of currencies, with the decline in the euro most notable. However, a stronger greenback did not impact commodities priced in dollars, as the broad-based DJ-UBS commodities index eased a paltry 0.01%.  Gold prices jumped 1.5%. 

This morning's premarket futures suggest a weak start to the day's trade, with attention focused on weekly jobless claims, and retailers' same-store-sales for March.  Fed-speak calendar includes addresses slated from Fed's Duke, Tarulla, Kocherlakota and Kohn.

Zacks Investment Research