Stocks saw considerable weakness during trading on Wednesday, extending the downward move seen in the previous session. The sell-off reflected continued disappointment with the minutes of the latest Federal Reserve meeting as well as lingering concerns about the global economy.
The major averages ended the session well off their worst levels of the day but still closed firmly in the red. The Dow fell 124.80 points or 1 percent to 13,074.75, the Nasdaq plunged 45.48 points or 1.5 percent to 3,068.09 and the S&P 500 dropped 14.42 points or 1 percent to 1,398.96.
The weakness on Wall Street came as traders continued to react to the minutes of the latest Fed meeting, which seemed to indicate that the central bank is not likely to engage in any further quantitative easing.
The latest minutes said only "a couple of members" indicated that additional stimulus could become necessary, while the minutes of the January meeting said "a few members" believed that conditions could warrant additional securities purchases.
Paul Ashworth, Chief U.S. Economist at Capital Economics, noted that some traders had been clinging to the possibility that a third round of quantitative easing was coming due in part to the dovish tone of Fed chairman Ben Bernanke's recent speech on the labor market.
A disappointing Spanish bond auction and a weaker than expected reading on U.S. service sector activity also generated some selling pressure.
The Institute for Supply Management released a report early in the trading day showing that its index of activity in the service sector fell to 56.0 in March from 57.3 in February.
While a reading above 50 still indicates growth in the service sector, economists had been expecting the index to show a more modest decrease to a reading of 57.0.
The negative news overshadowed a report from payroll processor Automatic Data Processing (ADP) showing continued job growth in the U.S. private sector.
ADP said employment increased by 209,000 jobs in March following an upwardly revised increase of 230,000 jobs in February. Economists had expected an increase of about 208,000 jobs compared to the addition of 216,000 jobs originally reported for the previous month.
In corporate news, Yahoo (YHOO) confirmed that it will lay off about 2,000 employees, or 14 percent of its global workforce, as it revamps itself into a slimmer company.
Gold stocks turned in some of the market's worst performances on the day, dragging the NYSE Arca Gold Bugs Index down by 4.3 percent. With the loss, the index ended the session at its worst closing level since August of 2010.
A sharp drop by the price of gold contributed to the substantial weakness in the sector, with gold for June delivery plunging $57.90 to $1,614.10 an ounce.
Significant weakness was also visible among electronic storage stocks, with the NYSE Arca Disk Drive Index falling by 3.1 percent. Memory chip maker SanDisk (SNDK) helped to lead the sector lower, tumbling by 11.1 percent after lowering its first quarter revenue guidance.
Networking, semiconductor, and software stocks also posted notable losses on the day, reflecting weakness in the technology sector. Financial, steel, and biotech stocks were also under considerable selling pressure amid broad based weakness in the markets.
In overseas trading, stock markets across the Asia-Pacific region came under pressure on Wednesday. Japan's Nikkei 225 Index tumbled by 2.3 percent, while Australia's All Ordinaries Index edged down by 0.1 percent. The markets in Hong Kong and mainland China were closed for public holidays.
The major European markets also showed significant moves to the downside on the day. While the U.K.'s FTSE 100 Index dropped by 2.3 percent, the French CAC 40 Index and the German DAX Index plummeted by 2.7 percent and 2.8 percent, respectively.
In the bond market, treasuries regained some ground after falling sharply in late-day trading on Tuesday. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 4.1 basis points to 2.243 percent.
While trading on Thursday may be impacted by the release of the Labor Department's report on weekly jobless claims, traders are also likely to place bets on Friday's monthly jobs report.
Since the U.S. stock markets will be closed for Good Friday, traders will have to wait until next Monday to react to the actual jobs numbers.
by RTT Staff Writer
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