U.S. Tries To Halt Stock Slide After Selloff Goes Global - Forbes

Forbes

Ben Bernanke (Getty Images via @daylife)

Equity markets ran red around the world Thursday, on concern the Federal Reserve’s commitment to keeping its foot on the gas may be wavering and a lackluster economic data out of China and Europe.

The selloff began in the U.S. Wednesday, when Ben Bernanke said the Fed could start to taper asset purchases this summer and FOMC minutes from the last meeting showed more discussion of such action, perhaps as early as June.

Meanwhile, Chinese factory activity slowed for the first time in months, as the flash HSBC purchasing managers index dipped to 49.6 (a reading below 50 indicates contraction). In Europe meanwhile, flash PMI came in ahead of expectations at 47.8, but still signaled slowing activity.

While stocks fell in both China and Europe, the day’s worst performance came from Japan where the Nikkei plunged nearly 7%. Long Japanese stocks and short the yen has been a popular trade this year with the Bank of Japan emptying both barrels on monetary stimulus efforts, but the trade had a sharp reversal Thursday with the Nikkei’s drop and a snapback for the nation’s currency in the forex market. (See “Is Japan The New Apple?”)

In New York, stocks were cutting morning losses as the major averages recouped a chunk of the early declines. The major indexes were down less than 1% about an hour before midday, with the S&P 500 off 8 points at 1,648, the Dow Jones industiral average just 31 points at 15,276 and the Nasdaq 10 points to 3,454.

Among stocks to watch Hewlett-Packard HPQ -2.61% bucked the market’s downward trend. The tech giant recorded declines in profit and revenue Wednesday, but earnings beat estimates and investors seem willing to stick with Meg Whitman‘s turnaround plan for now. Shares jumped 13.1%, the only gain among Dow components to top 1%.

Tech stocks were in the best shape of any sector, down only slightly in general and with names like HP, IBM IBM -0.21% and Dell managing to show gains. (See “Searching For A Silver Lining At Dismal Dell.”)

Concern about the Fed hitting the brakes on its stimulus actions has the 10-year Treasury yield back above 2% and weighed heavily on the rate-sensitive utility sector, where fat dividend yields look less attractive at lower spreads against the perceived safety of government debt. The Utilities Sector SPDR ETF slumped 1.7% Wednesday and names like Sempora Energy and Pepco Holdings were down more than 3% apiece to be among the S&P’s worst performers.