Chinese PMI Data And Oil Could Drag Markets This Morning

  •  Stocks fell over 2% on Thursday, with many tech stocks falling more than 3%.
  • This came despite strong economic fundamentals.
  • China, oil and the Fed all got the blame as fear replaced greed.
  • China's latest PMI data shows more pain could be ahead.
  • China and oil combined could mean more weakness today.
Chinese PMI Data And Oil Could Drag Markets This Morning

U.S. stocks crashed on Thursday, the worst trading day of the year by far, with the Dow Jones average falling 2% to finish the day at 16,990, below 17,000 for the first time in months. The NASDAQ fell more than 3%, finishing at 4,877, its first close below 5,000 in months, The S&P 500 fell 2.1%, closing at 2,035. It was the heaviest trading volume of the year.

This came despite some good economic news, like housing starts rising to the highest level since 2007. There was good news in earnings after-hours, with Hewlett-Packard (NYSE:HPQ) beating on earnings, 88 cents/share rather than the 80 cents expected, even if revenues were a little light. Salesforce (NYSE:CRM) had a beat on both revenues and earnings, earning 19 cents/share instead of the expected 17 cents, on revenue of $1.63 billion rather than the expected $1.6 billion. There was even a big merger, Valeant (NYSE:VRX) buying Sprout Pharmaceuticals, makers of a recently-approved “female Viagra” drug, for $1 billion cash.

None of that mattered. Fundamentals didn’t matter, earnings didn’t matter, and deals didn’t matter. They never do when greed turns to fear. Concern over the Fed raising rates, the fall of oil, China and emerging markets all made for selling that started early in the session and stayed late.

Very few stocks stood tall in the face of the selling pressure, but as always a few of them did. Eli Lilly (NYSE:LLY) rose $4.75%, Budweiser-maker Ambev (NYSE:ABEV) was up 2.5%, and DuPont (NYSE:DFT) was up 0.27%. Lumber Liquidators (NYSE:LL), the troubled flooring retailer, was up 8.94% to finish at $15.48.

Gold was also up, 2.16%, finishing at $1,152 per ounce, and so was gold miner Goldcorp (NYSE:GG), which rose 2.18% to $15.47 a share.

Stock Market Crash - Blame Oil, Blame China, Blame the Fed

There were plenty of villains to blame, oil being the first. West Texas Intermediate, the standard U.S. grade, finished at $41.14 and no one in the U.S. oilpatch can make money at that level. “We’re just killing each other and I don’t see it ending that quickly,” one analyst said. New loans for new drilling aren’t coming, and old loans from old drilling are being priced as junk.

Recognizing that, traders are looking to see who might go bankrupt next, with Sanchez Energy (NYSE:SN) falling almost 5% to $6.12, and Goodrich Petroleum (NYSE:GDP), a $20 stock a year ago, falling to 63 cents, down over 11% on the day.

A 2.29% fall in the Shanghai Index, most of it coming in the afternoon, and another 1.77% drop in Hong Kong’s Hang Seng Index, set the stage for all this. The Nikkei was down .94%, Germany’s DAX was down 2.34%, and the French CAC-40 was down 2%.

Despite this, some still want the Federal Reserve to raise interest rates in September. Market rates, however, continue to fall, the 10-year note falling to 2.07%, and the 30-year bond finishing at 2.74%.

Tech Stocks That Rose, Fell Hard

The tech sector was not immune from the latest fall. Just the opposite. Netflix (NASDAQ:NFLX) fell 7.84% to $112.49, Apple (NASDAQ:AAPL) was down 2.05% to $112.65, and Amazon (NASDAQ:AMZN) lost 3.22% to finish at 3.22%. Lagging tech stocks fell, too, but not as much, with IBM (NYSE:IBM) dropping 0.79% to $152.72, and Hewlett-Packard falling 1.37% before earnings and another 0.95% after, to $27.10.

Then there were the other big names, like Tesla (NASDAQ:TSLA) which was down over 5%, nearly giving up all of its gains from its resilient two day rally earlier this week. There was hoard of other big losers like Plug Power (NASDAQ:PLUG) which lost 7.7%, GoPro (NASDAQ:GPRO) which lost 7.4%, Micron (NYSE:MU) which lost 7.3% and Ambarella (NASDAQ:AMBA) which was down 7.2%.

Social biggies lost a lot of ground too like Facebook (NASDAQ:FB) which lost nearly 5% and Twitter (NASDAQ:TWTR) which lost 5.8% to return to its IPO price of $26.

How The Day Began In Asia - Asian Markets Decline Further

China's factory PMI (purchasing managers index) fell to a 77 month low of 47.1, further denting sentiment and dragging major Asian indices and oil prices even lower. China's Shanghai composite was down about 2% and Japan's Nikkei was down nearly 3%, as this piece was edited at 2.30 A.M. EST, and major indices like the Hang Seng, the KOSPI and Indian stock market indices were all in the red.

Oil prices, under pressure following the PMI data, now run the risk of falling below the psychological $40 per barrel mark. Oil is poised for its longest weekly losing streak in 29 years.

To make things worse, North Korea and South Korea could be at war, and Greece is scheduled to conduct elections, in a month from now tentatively. Irrespective of what these things mean in monetary terms, at a time like this, they mean just one thing, 'negative' sentiment.

So, What Happens In The Markets Today?

If you look at the U.S. markets alone though (if you can), there's mostly a lot of positives. The fact that housing sales are at a 8 year high, and unemployment claims are trending lower is a good thing. Then there's also the fact that the Fed thinks things are looking up, enough to mull a rate-hike in the foreseeable future. So the fundamentals are getting better for the U.S. even though there are issues, like oil, and the rather dull sentiment around global markets in general.

A stock wash-out like this, in the absence of bad economic data, is often the sign of a buying opportunity. But getting in front of a “falling knife,” a market that’s dropping very, very fast, is also a great way to lose money.

Will traders regain their nerve today, or will the selling accelerate? There will be hesitation over buy buttons until traders feel more comfortable that a bottom has indeed been found, somewhere.

You can check out our stock market news daily - Markets This Morning, for a quick look at key news you should track before the bell.

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