Stocks headed further into the red on Monday as investors reacted to a downbeat China manufacturing report and escalating tensions in the Ukraine.
Stocks continued to fade on Monday, as further evidence of the economic slowdown in China reinforced concern about the state of the global
economy. Everyone in the world seemed worried about the economic data from China – except for the Chinese, who saw the bad news as a reason to expect that the People’s Bank of China will loosen its monetary policy. Increasing tensions in the Ukraine added to investors’ worries about global economic health.
The Markit Flash U.S. Manufacturing PMI indicated a decline to 55.5 from February’s 57.1. Nevertheless, the flash reading for March was the second-highest since January of 2013.
The Dow Jones Industrial Average (SPDR DJ Industrial Average ETF (ARCA:DIA)) lost 268 points to finish Monday’s trading session at 16,276 for a 0.16 percent decline. The S&P 500 (SPDR S&P 500 ETF (ARCA:SPY)) fell 0.49 percent to 1,857.
The Nasdaq 100 (PowerShares QQQ ETF (NASDAQ:QQQ)) dropped 0.98 percent to finish at 3,617. The Russell 2000 (iShares Russell 2000 Index (ARCA:IWM)) sank 1.30 percent to 1,178.
In other major markets, oil (United States Oil Fund (USO)) dipped 0.06 percent to close at $35.82.
On London’s ICE Futures Europe Exchange, June futures for Brent crude oil declined 30 cents (0.28 percent) to $106.36/bbl. (United States Brent Oil Fund LP (ARCA:BNO)).
June gold futures declined $1.70 (0.13 percent) to $1,309.40 per ounce (SPDR Gold Trust (ARCA:GLD)).
The transportation got stuck in traffic during Monday’s trading session, as the Dow Jones Transportation Average dipped 0.06 percent to 7,510 (NYSEARCA:iShares DJ Transport Average Index (ARCA:IYT)).
In Japan, the exchange rate for the yen remained the dominant factor in stock market activity. Japanese stocks soared as the yen weakened to 102.49 per dollar during the last 90 minutes of Monday’s trading session in Tokyo. A weaker yen causes Japanese exports to be more competitively priced in foreign markets (RYDEX CurrencyShares Japanese Yen (ARCA:FXY)). Shares of Panasonic Corp. (PCRFF.PK) skyrocketed 6.00 percent. The Nikkei 225 Stock Average jumped 1.77 percent to 14,475 (iShares MSCI Japan (EWJ)).
In China, bad economic news was good news for the stock market, as further evidence of an economic slowdown boosted expectations for stimulus efforts from the People’s Bank of China and the central government. The HSBC Flash China Manufacturing PMI fell to 48.1 from February’s 48.5. A reading below 50 indicates contraction. Economists were expecting a slight increase to 48.7. The Flash China Manufacturing Output Index sank to 47.3 from February’s 48.8. The Shanghai Composite Index soared 0.91 percent to 2,066 (iShares FTSE/Xinhua China 25 Index (ARCA:FXI)). In Hong Kong, a number of better-than-expected quarterly earnings reports added to the enthusiasm. Hong Kong’s Hang Seng Index jumped 1.91 percent to 21,846 (iShares MSCI Hong Kong (ARCA:EWH)).
In Europe, stocks declined sharply, as concerns about escalating tensions in the Ukraine and the economic slowdown in China weighed heavily on the minds of investors. Although the Markit Flash Eurozone Composite PMI took a slight dip to 53.2 from February’s 53.3, the reading was in-line with economists’ expectations. The Flash Eurozone Manufacturing PMI slipped to 53.0 from February’s 53.2. The Euro STOXX 50 Index sank 1.41 percent to 3,052 – dropping back below its 50-day moving average of 3,085. Its Relative Strength Index fell from 52.09 to 44.88 (SPDR DJ Euro STOXX 50 (FEZ)).
Technical indicators revealed that the S&P 500 remained above its 50-day moving average of 1,832 on Monday, after a 0.49 percent decline to 1,857. Its Relative Strength Index (RSI) fell from 55.92 to 52.2. The MACD is dropping away from the signal line, suggesting that the S&P could continue its decline during the immediate future.
On Monday, all sectors were in negative territory except for the utilities sector, which advanced 0.27 percent.
Consumer Discretionary (SPDR Consumer Discr. Select Sector (ARCA:XLY)): -1.00%
Technology: (SPDR Select Sector - Technology (XLK)): -0.08%
Industrials (Industrial Sector SPDR Trust (ARCA:XLI)): -0.33%
Materials: (SPDR Materials Select Sector (ARCA:XLB)): -0.78%
Energy (SPDR Energy Select Sector Fund (ARCA:XLE)): -0.21%
Financials: (Financial Select Sector SPDR Fund (ARCA:XLF)): -0.04%
Utilities (SPDR Select Sector - Utilities (XLU)): +0.27%
Health Care: (SPDR - Health Care (ARCA:XLV)): -1.12%
Consumer Staples (SPDR - Consumer Staples (ARCA:XLP)): -0.09%
Bottom line: After Monday’s report from HSBC, which indicated that China’s manufacturing activity declined for the fifth consecutive month, American investors expressed their anxiety about the health of the global economy by selling stock. Escalating tensions in the Ukraine served to aggravate those fears.
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