North American stocks remained well under water in midday trading on Thursday, battered by another round of worrisome economic news a day after the Federal Reserve decided to take a cautious approach to stimulus.
At noon, the Dow Jones industrial average was down 87 points, or 0.7 per cent, to 12,738. The broader S&P 500 was down 12 points, or 0.9 per cent, to 1344. In Canada, the S&P/TSX composite index was down 174 points, or 1.5 per cent, to 11,586.
The declines follow a trio of bad economic news from the United States, highlighting the difficulties facing the recovery. U.S. initial jobless claims for the period ended last week remained stubbornly high, at 387,000, pushing the closely watched four-week moving average even higher.
The Federal Reserve Bank of Philadelphia’s economic index contracted the most in about a year and hit its lowest level since last August, signalling a rough patch for U.S. manufacturing. And, U.S. existing home sales slumped 1.5 per cent in May, in line with expectations but a disappointing move for the housing recovery.
The disappointments followed the Fed’s monetary policy statement on Wednesday. While the Fed acknowledged the worsening economic conditions and suggested that there is more it can do to help turn things around, it decided upon a relatively tame course of action – extending its so-called Operation Twist program, or buying long-term bonds and selling short-term bonds, until the end of the year. Some observers had been hoping for outright quantitative easing, which is seen as a more aggressive response.
In market action, commodities producers led the selloff as commodity prices fell sharply. Crude oil fell to $79.76 (U.S.) a barrel, down $1.69 and marking its first foray below $80 a barrel in eight months. Gold fell to $1,575 an ounce, down $33.
Within the S&P 500, energy stocks fell 2.7 per cent and materials fell 2 per cent. But the rout wasn’t confined to commodity producers: Information technology stocks fell 1.4 per cent and consumer discretionary stocks fell 1.3 per cent. Defensive areas of the market held up better. Utilities, telecom services and health care stocks were relatively flat.
Within Canada’s benchmark index, commodity producers were by far the biggest drags: Energy stocks fell 2.6 per cent and materials fell 2.4 per cent. Other areas weren’t impacted nearly as badly. Financials, for example, fell just 0.6 per cent.
The losses extended to Europe though. There, the U.K.’s FTSE 100 fell 1 per cent and Germany’s DAX index fell 0.8 per cent.