If you look at life one way, there is always cause for alarm. - Elizabeth Bowen.
We don’t want to sound alarmist but things don’t appear to be all that good. Fear has returned in world markets and risk aversion too is back amid increasing signs that economic recovery in key regions is losing steam. The CBOE volatility index (VIX) jumped 13% to 25.29 on Wall Street while government bonds are seeing strong demand.
The Fed’s move to go for fresh easing in a bid to bolster the US economy coupled with disappointing data from China and the UK spooked investors. So, risky assets like stocks, commodities and high-yielding currencies are down. Gold is up despite strength in the dollar. But, the US currency has hit 15-year low against the yen.
Without doubt, the start will be soft but since we corrected yesterday there could hopefully be some recovery by the close. In a really bad scenario, strong support is seen at 5300. IIP data and a few key earnings are the main catalysts for the day.
Results Today: Ansal Properties, Apollo Hospitals, Cummins India, Divi's Lab, Hathway Cable, Hindustan Copper, HOEC, ICRA, Indiabulls Real Estate, Indraprastha Gas, Moser Baer, MTNL, PTC India, Ranbaxy, SBI, Shree Renuka Sugars, Talwalkar's, Tata Power, Tata Steel and Technofab Engineering.
FIIs were net sellers of Rs858.1mn in the cash segment on Wednesday (provisionally), according to the NSE web site. Local funds were net buyers of Rs235mn. In the F&O segment, they were net buyers at Rs5.21bn. Foreign funds were net buyers of Rs6.14bn in the cash segment on Tuesday, according to SEBI's web site.
US stocks retreated after the Fed policymakers said that the central bank would buy government debt and as new trade figures suggested a slowdown in growth.
The trade data came on the heels of economic reports from China and the UK that indicated that the global economic recovery is running out of gas.
The Dow Jones Industrial Average suffered its biggest single-day fall since June 29. The Dow slumped 265.42 points, or 2.5%, to end at 10,378.83.
Alcoa led the blue-chip decline that extended to all 30 of the Dow's components, with shares of the aluminum manufacturer down 6.1%.
The S&P 500 Index shed 31.59 points, or 2.8%, to close at 1,089.47, its first fall below 1,100 this month. The broader US market is down 16% from April 23 to July 2, but it has not gone back to the pre-correction level of 1,217 on the S&P 500 seen on April 23.
The Nasdaq Composite Index fell 68.54 points, or 3%, to finish at 2,208.63.
For every share gaining six fell on the New York Stock Exchange, where nearly 1.2 billion shares were exchanged. Composite volume topped 4.7 billion.
The CBOE volatility index (VIX) jumped 13% to 25.29.
The dollar gained against the euro and pound, but touched a 15-year low versus the Japanese yen.
Oil futures for September delivery fell $1.76 to settle at $78.49 a barrel.
Gold futures closed just below $1,200 an ounce on the New York Mercantile Exchange.
Prices for Treasurys were higher, moving the corresponding yields lower. The yield on the 10-year note fell to 2.7% from 2.77% late on Tuesday. Investors submitted bids of almost $73 billion for the government's sale of $24 billion worth of 10-year notes.
The Federal Reserve said late on Tuesday that the pace of economic recovery is likely to be more modest in the near term than had been anticipated. It would purchase long-term Treasury bonds in an effort to trim borrowing costs.
Earlier on Wednesday, the government reported the trade deficit widened in June to $49.9 billion, much more than economists had expected.
US economic growth from April through June was probably softer than first estimated, with GDP likely to be revised down to 1.3% from 2.4% previously in the wake of the trade deficit report, according to a private survey.
The bigger-than-anticipated trade gap suggests second-quarter GDP is indeed likely to be revised down closer to 1% or 1.5%.
Meanwhile, the Bank of England lowered its forecast for UK economic growth, and said inflation is likely to be below the 2% target in 2012.
A string of data from China reinforced a growing view that the economy is moderating in the wake of the government measures to curb property speculation and rein in record lending.
The National Association of Realtors released a report showing the median price of a single-family home in the second quarter rose 1.5% over the year to $176,900.
According to the Office of Management and Budget, the nation had a $165.04 billion budget deficit in July. Economists expected the Treasury budget to have a $180.7 billion deficit.
After the closing bell, tech bellwether Cisco posted a 79% jump in fiscal fourth-quarter profit, but revenue missed expectations. The network equipment maker posted net income of $1.9 billion, or 33 cents a share. Analysts polled by Thomson Reuters were expecting 42 cents a share. Cisco shares fell almost 5.5% in after-hours trading.
A federal judge ordered Wells Fargo to pay more than $200 million in restitution to California customers for manipulating and multiplying overdraft fees. The 90-page ruling said "a bookkeeping device" allowed the bank to multiply the number of fees it could collect from a single mistake.
AIG said that it would sell most of its consumer finance unit to investment manager Fortress. Further terms weren't disclosed, but it should allow AIG to raise cash as it seeks to pay down its obligations to taxpayers stemming from its 2008 bailout. AIG shares dropped to close 5.9% lower.
Shares of Macy's rallied to close almost 6% higher Wednesday after the department store chain posted a quarterly profit that beat estimates and boosted its earnings forecast for the year.
Toyota said that an investigation has so far found no problems with its cars beyond those the company has already recalled. Researchers for the National Highway Traffic Safety Administration looked into 58 crashes of Toyota cars and have not found any further safety defects but shares ended 2.8% lower.
Fed's latest policy action, coupled with data from China and Japan aside from the Bank of England's move to lower its growth forecasts combined to pile up pressure in the European markets. Miners and banks were among the worst performers in Europe.
The Stoxx Europe 600 index dropped 2% to 254.68 points, wiping out gains made so far this month.
The benchmark indexes in Spain and Italy both finished down 3.2%.
The French CAC-40 index fell 2.7% to 3,628.29. In Germany, the DAX index slipped 2.1% to 6,154.07. The UK's FTSE index lost 2.4% to 5,245.21, as the banking sector was hard hit.
The euro tumbled 2.1% to $1.2898. The dollar index rallied 1.8% to 82.224.