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A street sign in front of the New York Stock Exchange on Wall Street in New York, February 10, 2009. REUTERS/Eric Thayer/File Photo
CAI jumps on a $1 billion takeover of Mitsubishi Bank shares extends declines China’s central bank volatility index jumps to 20 points and indices fall: Dow 1.14%, S&P 0.94%, Nasdaq 0.79%
(Reuters) – The Dow Jones fell 1 percent on Friday after Federal Reserve official James Bullard said inflation was stronger than expected and it would take the central bank several meetings to figure out how to scale back stimulus.
The Dow Jones and the S&P 500 are set for their worst day in a month after St. Louis Federal Reserve Chairman Bullard said he was among the seven officials who saw price increases starting next year to contain inflation.
The CBOE Volatility Index (.VIX), Wall Street’s fear gauge, rose to 20.60 points, its highest since May 21, following his comments.
“This may indicate that inflation is becoming a concern for the Federal Reserve,” said Rick Meckler, partner at Cherry Lane Investments, a family investment office in New Vernon, New Jersey.
“Second, it indicates that the tightening could derail economic growth and S&P 500 earnings sooner than investors think.”
Wall Street’s main indexes were shaken earlier this week after the Federal Reserve unexpectedly indicated that it may start tapering off the massive stimulus sooner than expected, putting the S&P 500 (.SPX) on course for a winning streak. It lasted three weeks. Read more
The weaker-than-expected weekly jobless claims on Thursday pushed out financial stocks related to economy (.SPSY), energy (.SPNY) and materials (.SPLRCM).
Interest rate-sensitive banking shares (.SPXBK) fell 1.8% as the US yield curve flattened. [US/]
“The sudden drop in long-term yields this week shows that the market is likely concerned about the strength of the recovery in the second half of this year,” said Ryan Detrick, senior market analyst at LBL Financial.
At 11:47 a.m. ET, the Dow Jones Industrial Average (.DJI) was down 386.62 points, or 1.14%, at 33436.83, and the S&P 500 (.SPX) was down 39.84 points, or 0.94%, at 4,182.02. The Nasdaq Composite Index (.IXIC) fell to 111.22 points, or 0.79%, to 14,050.13 points.
Friday is also “Quadruple Magic Day”, which is the simultaneous quarterly expiration of US options and futures that results in increased trading volume when the market is closed.
Randy Frederick, vice president of trading and derivatives for Charles Schwab, noted that this is the largest options expiration in history.
Shares of transportation finance and logistics company CAI International Inc (CAI.N) jumped 46.5% after it agreed to buy Mitsubishi HC Capital Inc (8593.T) for $1.1 billion.
Declining issues outnumbered advanced stocks by 2.88 to 1 on the New York Stock Exchange and by 2.63 to 1 on the Nasdaq.
The S&P posted 12 new 52-week highs and 1 new low, while Nasdaq made 32 new highs and 38 new lows.
Covering by Sagarika Jaisingani in Bengaluru; Edited by Magu Samuel
Our Standards: Thomson Reuters Trust Principles.
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