Here’s How Markets Turned Good News Into Bad
Thursday was a rough day for the U.S. markets because good news was bad news and bad news was bad news.
Stocks sank on Thursday while caught in a double-bind resulting from the current “pre-taper of quantitative easing” era. The rule that “good news is bad news” applied to the better-than-expected report on initial unemployment claims, which reinforced expectations that the Federal Reserve would begin to taper its bond-buying in September because the unemployment situation is improving.
On the other hand, the bad news that the Philly Fed Manufacturing Index and the Empire State Manufacturing Survey both sank, was just plain-old bad news — doing nothing to abate the taper and serving only to hurt stock prices. The bearish call from Cisco (NASDAQ:CSCO) CEO John Chambers during his Wednesday afternoon conference call really spooked investors. His planned layoff of 4,000 employees apparently did nothing to inspire the pro-quantitative easing crowd. The explanation by Chambers that emerging market growth has stalled, helped fuel the already-rising sentiment of risk-aversion among investors.
The Dow Jones Industrial Average (NYSEARCA:DIA) lost 225 points to finish Thursday’s trading session at 15,112 for a 1.47 percent drop. The S&P 500 (NYSEARCA:SPY) sank 1.43 percent to close at 1,661. The Nasdaq 100 (NASDAQ:QQQ) dropped 1.70 percent to finish at 3,076. The Russell 2000 (NYSEARCA:IWM) fell 1.93 percent to end the day at 1,027. In other major markets, oil (NYSEARCA:USO) advanced 0.39 percent to close at $38.24.
On London’s ICE Futures Europe Exchange, October futures for Brent crude oil advanced by 57 cents (0.52 percent) to $109.39/bbl. (NYSEARCA:BNO). December gold futures advanced by $31.80 (2.38 percent) to $1,365.20 per ounce (NYSEARCA:GLD). Transports ran aground during Thursday’s session, with the Dow Jones Transportation Average (NYSEARCA:IYT) dropping 0.91 percent.