From Fred Imbert: Stocks fell on Thursday after the European Central Bank slashed its economic growth forecast for 2019 and announced a new round of stimulus to help banks in the region, stoking worries over the global economy.
The Dow Jones Industrial Average traded 246 points lower as shares of 3M and United Technologies lagged. The S&P 500 fell 0.7 percent, led by declines in the industrials and materials sectors. The Nasdaq Composite dropped 0.8 percent. The indexes were headed for their fourth consecutive loss.
Both the Nasdaq and S&P 500 also broke below their 200-day moving averages, levels that are closely watched by traders.
ECB President Mario Draghi said the central bank cut its growth estimate to 1.1 percent, down from a 1.7 percent expansion forecast released in December.
The ECB also said its new targeted longer-term refinancing operations (TLTRO-III) stimulus program will start in September and run through March 2021. TLTROs are loans provided by the ECB to European banks at a low rate, making it easier for them to lend money to consumers, which in turn can help stimulate the economy. This is the third stimulus injection from the ECB since 2014.
They’re basically admitting the economy is quite soft,” said Peter Cardillo, chief market economist at Spartan Capital Securities. This adds to one thing: uncertainty.”
The ECB’s announcements come amid lingering concerns over a possible economic slowdown across the globe. The Bank of Canada said Wednesday there was “increased uncertainty” around future rate hikes, while Australia’s fourth-quarter GDP expanded at a pace of just 0.2 percent. In the U.S., meanwhile, the Federal Reserve has already signaled it will be “patient” in raising rates.
The dollar surged against a basket of currencies, trading 0.4 percent higher at 97.28. Against the euro, the greenback traded 0.6 percent higher at $1.139.
Treasury yields fell, with the 10-year note rate sliding to 2.65 percent while the 2-year yield dipped to 2.49 percent.
Thursday’s moves come after the major indexes posted their third straight day of losses, with investors eager to know details from trade negotiations between the U.S. and China.
Data out on Wednesday showed that the U.S. trade deficit remains a problem. President Donald Trump has imposed a series of tariffs on countries like China, in an attempt to bring down his country’s trade deficit. However, Wednesday’s data showed that trade deficit in the U.S. hit a 10-year high in December.
Stocks are still up sharply for the year despite Thursday’s losses. The S&P 500 and Nasdaq have both risen more than 10 percent while the Dow is up more than 9 percent.
Tim Courtney, chief investment officer at Exencial Wealth Advisors, said progress in U.S.-China trade talks along with the Fed signaling a more patient approach to rate hikes boosted stocks to start off the year. But “the market is sort of waiting to get more data on global growth. That’s the third thing hanging out there and it’s going to be the arbiter for the market moving forward.”
–CNBC’s Silvia Amaro contributed to this report.
The Invesco CurrencyShares Euro Currency Trust (FXE) was trading at $107.15 per share on Thursday morning, down $0.79 (-0.73%). Year-to-date, FXE has declined -7.32%, versus a 3.49% rise in the benchmark S&P 500 index during the same period.
This article is brought to you courtesy of CNBC.