The US markets ended the session on Thursday with declines as the European Central Bank (ECB) lowered its economic growth forecast for 2019 and announced a new round of stimulus for the region’s banks, fueling worries for the global economy.
The blue-chip index Dow Jones Industrial Average wiped out 200 points, or 0.8%, reaching a level of 25,473.23 points. The largest losers from the index were Caterpillar and Walgreens Boots Alliance.
The broader index S&P 500 dropped by 0.8% to 2,748.93 points, while the technology benchmark Nasdaq Composite declined by 1.1% to 7,421.46 points. This is the fourth consecutive session of declines for the main Wall Street indexes.
The CBOE Volatility Index, which measures the implied volatility of S&P 500 options, was up 11.27% to 16.59 a new 1-month high.
Earlier on Thursday, the ECB Governor Mario Draghi said that the financial institution has lowered its growth forecast from 1.7% to 1.1%.
The ECB also announced that it is launching a new round of incentives for banks. In September 2019, will be launched a new series of targeted longer-term refinancing operations (TLTRO-III), which will be held quarterly, and will end in March 2021. Each of them will have a two-year maturity. TLTRO-III is the third injection of ECB incentives.
The ECB actually admit that the economy has weakened quite a lot, which contributes only to uncertainty.
The ECB’s position comes amid continuing concerns about a possible global economic slowdown. The Canadian Central Bank reported on Wednesday that there was “increased uncertainty” about future interest rate rises, while Australia’s gross domestic product rose at just 0.2%. In the US, the Federal Reserve has already signaled that it will be “patient” with interest rates rising.
The dollar index, which measures the strength of the greenback against a basket of competitive currencies, rose by 0.85% to 97.69 points.
On the bond markets, the yields on 10-year and 30-year US government bonds fell to 2.643% and 3.031%, respectively.
On Wednesday, it became clear that the US trade deficit continued to be a problem, despite President Donald Trump’s attempts to impose a series of tariffs on China precisely with the intention of shrinking it. However, the US deficit has reached a 10-year high in the past year.
However, US markets continue to have strong growth for the year, despite their recent declines. For S&P 500 and Nasdaq it is over 10%, while for Dow it is over 9%.
Corporate stocks performance
Falling stocks outnumbered advancing ones on the New York Stock Exchange by 2050 to 959 and 92 ended unchanged.
The best performers of the session on the Dow Jones Industrial Average were Verizon Communications (+1.11%), Exxon Mobil Corp (+1.11%) and Nike Inc (+0.15%). The big losers from the benchmark during the session were Walgreens Boots Alliance (-2.14%), Caterpillar Inc (-1.51%) and 3M Company (-1.45%).
The top performers on the S&P 500 were Electronic Arts Inc (-4.84%), CenturyLink Inc (-4.76%) and Allergan PLC (-3.99%). The worst performers were Kroger Company (-9.95%), Mosaic Co (-4.48%) and Wynn Resorts Limited (-3.95%).
The shares in Synergy Pharmaceuticals fell to all-time lows, wiping out 52%.
The stocks of Costco rose in after-market session as quarterly earnings beat Wall Street’s expectations.
Corporate earnings recap
Dollar Tree reported fourth-quarter earnings that beat analysts’ expectations on Wednesday and revenue that topped forecasts. The firm reported earnings per share of 1.93 USD on revenue of 6.21 billion USD, beating slightly the analysts’ expectations. Dollar Tree shares gained 4.17% to trade at 99.45 USD in pre-market trade following the report. The company could see upside if tariffs on imported Chinese goods remain at 10 percent or are removed completely. This would create a significant margin expansion in the back half of 2019.
Shares of Costco Wholesale posted better-than-expected quarterly earnings. Costco reported its fiscal second-quarter earnings rose to 889 million USD, or 2.01 USD per share, from 701 million USD, or 1.59 USD per share, a year earlier. The company’s revenue grew to 35.4 billion USD versus 33 billion USD and comparable sales rose to 6.7% while e-commerce sales jumped 25.5% in the quarter. Analysts had projected earnings of 1.69 USD per share on revenue of 35.65 billion USD.