Fed Stimulus Withdrawal Comments Spark World-wide Sell-Off

Nichole Harper
20 Jun, 2013
New York City

U.S. stocks extended losses for the second after Fed Chairman Ben Bernanke comments that laid out the timetable for the stimulus taper. European markets led the world market decline with a loss of more than 3%. Gold plunged 5% and oil fell 3%. The yield on 10-year U.S. bond increased to 2.42%.

[R]1:45 PM New York – U.S. stocks extended losses for the second after Fed Chairman Ben Bernanke comments that laid out the timetable for the stimulus taper. European markets led the world market decline with a loss of more than 3%. Gold plunged 5% and oil fell 3%. The yield on 10-year U.S. bond increased to 2.42%.[/R]

Stocks on Wall Street declined for the second day in a row and leading market indexes fell more than 1% again.

The S&P 500 index declined 1.8% or 29.4 to 1,599 and the Nasdaq Composite Index dropped 1.6% or 55.26 to 3,387.94.

Existing home sales increased 4.2% to an annual rate of 5.18 million from 4.97 million in April, according to the data released by the National Association of Realtors in Washington today.

The median price of homes increased 15.4% from a year ago month to $208,000, the highest since July 2008.

Separately, the Labor Department report showed initial jobless claims increased 18,000 to 354,000 in the week ending on June 15 from a revised 336,000 in the previous week.

European Markets

European markets declined the most in 18 months following the sharp losses in Asian markets after comments from Fed Chairman Ben Bernanke.

In London, FTSE 100 index dropped 3% and in Frankfurt DAX 30 index plunged 3.3%.

The market rout in Europe was deeper in smaller markets and CAC 40 index in Paris plummeted 3.7%. Other markets in the region, Swiss, Spanish and Italian markets declined more than 3%.

Asian Markets

Asian markets reacted first to the Fed Chairman Ben Bernanke comments and sold off sharply.

Jakarta index plunged 4% and market indexes in Hong Kong declined 2.9%. The benchmark index in Mumbai fell 2.7% and indexes in Australia, Thailand and in Seoul declined more than 2%.

The Nikkei index in Tokyo declined 1.7% and the yen fell 1%.

Currencies in emerging markets in Asian and in Europe declined and the Indian rupee hit an all-time new low against the dollar and hovered near 60 against a dollar.

Stocks in Review

The Kroger Co ((KR)) dropped 4.9% or $1.72 to $33.40 after the supermarket operator reported total sales in the first quarter ending on May 25 grew 3.4% to $30 billion. Net earnings for the quarter jumped 9.6% to $481 million or 92 per diluted share compared to $439 million or 78 cents.

The company lifted its net earnings guidance for the year and now expects between $2.73 and $2.80 per diluted share.

Pier 1 Imports, Inc ((PIR)) fell 3.9% or 93 cents to $23.06 after the home furnishings retailer said total sales in the first quarter ending on June 1 jumped 9.3% to $394.9 million. Comparable store sales for the quarter climbed 5.9%

Net income for the quarter climbed 14% to $20.3 million or 19 per diluted share compared to $17.8 million or 16 cents.

The retailer lifted its guidance for fiscal year 2014 and now expects earnings per share in the range of $1.27 to $1.32 from earlier forecast of $1.26 to $1.31. Comparable store sales grow in the mid single-digit range.

Rite Aid Corporation ((RAD)) plunged 6.1% to $2.92 after the drugstore chain reported revenue in the first quarter ending on June 1 slid 2.7% to $6.3 billion. Same store sales for the quarter dropped 2.5%

Net income for the quarter climbed nearly three-fold to $91 million or 9 per diluted share compared to $30.7 million or 3 cents.

Rite Aid confirmed its fiscal 2014 guidance for sales between $24.9 billion and $25.3 billion and same store sales to range from a decrease of 0.75% to an increase of 0.75%.

Red Hat, Inc. ((RHT)) gained 1.1% or 52 cents to $46.74 after the software solutions provider reported total revenue in the first quarter ending in May soared 15% to $363 million. Net income in the quarter jumped 8% to $43 million or 21 cents a diluted share compared to $37 million or 19 cents.