Has the bull market been gored?
The Dow Jones industrial average gave back all its winnings for the year on Thursday, cratering 1.9 percent or 317.06 points as investors grappled with a default by Argentina, tensions in Gaza, lingering fears over Russia, a spike in the US employment cost index and disappointing earnings from previous high-fliers Exxon, Samsung Electronics and Whole Foods.
“Investors finally showed some signs of fatigue, or at least general nervousness, over what has become fairly lofty stock prices,” said Russ Koesterich, the chief investment strategist for BlackRock.
Koesterich added that Thursday’s abrupt dip was at least partially signaled a week ago by the “aggressive selling of risky assets, including US equities and high-yield bonds.”
All the broader indexes retreated from recent highs Thursday, with the Nasdaq Composite Index giving up 2.09 percent and the S&P 500 falling 2 percent.
The VIX, or Volatility Index, surged 27 percent Thursday to 16.95, the highest level since April 11 on increasing fears that one of the longest post-war bull markets may be running out of steam.
And it was not contained to the US; foreign markets churned as well, recording reductions of 2.10 percent for Spain’s IBEX 35, 1.94 percent for Germany’s DAX and 1.84 percent for Brazil’s Bovespa.
None was hit as hard as Argentina, however, where the Merval Index plunged 8.4 percent in response to the country missing a deadline on a bond payment.
Back in the US, all 10 stock-market sectors fell together, each giving up between 2 percent (materials) and 1.56 percent (utilities) during the day’s trading session.
The US Bureau of Labor Statistics reported Thursday that the ECI, which gives a quarterly snapshot of labor prices, posted its largest increase since the third quarter of 2008.
The spike spooked more than a few investors into thinking the Federal Reserve System, ever vigilant about inflation, could curb its easy-money policies sooner rather than later.
As for individual stocks, Exxon Mobil fell 4.2 percent despite reporting a 28 percent increase in second-quarter earnings. The disappointment came from its reducing daily oil and gas output during the quarter by 5.7 percent.
Samsung shares slipped 3.7 percent after announcing a third straight quarter of shrinking profits and lackluster forward guidance.
Whole Foods shares took a dive, falling 2.3 percent as investors responded to the healthy grocery store’s fourth sales-cut projection in nine months.