- The Fed’s decision not to raise interest rates, citing global growth problems, hit U.S. markets hard
- Banks were hit worst, but oil and oil stocks also fell sharply
- The Syrian refugee crisis hangs heavy on Europe
Fed chair Janet Yellen chose not to raise interest rates Thursday citing troubled economy that use the
U.S. dollar as a de-facto currency, as Argentina has done off-and-on for many years. Traders reacted like she’d surrendered the country.
Stocks plunged on Friday, with the Dow (INDEX:INDU) leading the way, down 1.76% to finish at 16,384. The broader S&P (INDEX:SPAL) was down 1.62%, finishing at 1,958. The tech-heavy Nasdaq (INDEX:COMPX) fell 1.36% to finish at 4827.23. The markets started off .65%, tried to rally around noon, then fell steadily all afternoon, finishing at their lows for the day.
Big Banks Hit Hard Again
Once again, it was the banks who did worst. Bank of America (NYSE:BAC), where CEO Brian Moynihan faces a shareholder vote Tuesday that could strip him of his chairman title . The shares were off 1.95% to $15.55. But JP Morgan Chase (NYSE:JPM), which faces no shareholder revolt, dropped 2.63% to $61. Goldman Sachs (NYSE:GS) was off 2.99% to $180.91. Wells Fargo (NYSE:WFC) was off 2.26% to $51.03.
In all these cases, the stocks fell at the open to near where they finished and stayed there. It didn’t matter whether the bank was considered troubled or superior.
Oil Also Fell
Oil was another victim of the Fed decision. Traders figured that if Yellen thought the global economy was troubled, demand won’t pick up soon and it was time to sell. West Texas Intermediate fell nearly 5% to $44.68, and Brent fell 3.39% to $47.47.
This hit all oil stocks. Exxon Mobil (NYSE:XOM), considered the strongest, most diversified, and more international oil stock in the world, dropped 2.47% on the day to $72.57. Transocean (NYSE:RIG), the largest maker of drilling rigs, dropped 9.16% to $14.32. As recently as July of 2014 the stock was over $45. Sanchez Oil(NYSE:SN), a leader in the Eagle Ford shale of Texas, dropped 7.78% and finished at $5.69.
The big story of the day, and perhaps a sign of things to come, was the prepackaged bankruptcy filing of Samson Resources, which had been controlled by the private equity firm KKR (NYSE:KKR) and was worth $7 billion. Despite the company’s move to take its transaction processing company, First Data Resources, public in the near future (transaction processing is one of the hottest parts of the market), the company’s shares lost $3.06, finishing at $18.86 after an attempt to hold the $19 level around noon failed.
Tech Weak But Holding
Tech stocks were weak but held their own amid the carnage. Global Payments (NYSE:GPN), where my wife happens to work, was down just 95 cents, or .87%, on the day to finish at $113.74. There were similar fates in store for rivals like Heartland Payments (NASDAQ:HPY), down 1.03% to $61.08, Mastercard (NYSE:MA), down 1.08% to $92.20, and Visa (NYSE:V), down 1.62% to $69.74.
The same was true for the biggest techs. Apple (NASDAQ:AAPL) finished off .41% to finish at $113.45, Microsoft(NASDAQ:MSFT) was down 1.74% to $43.48, and Amazon.com (NASDAQ:AMZN) actually eked out a small gain, rising 1.39% to $540.26, an all-time high.
In other words, there is hope.
So What Happens Now?
A lot depends on how European markets open the week. The German DAX finished down 3.06% Friday, hurt by falling confidence and the growing flood of refugees from the Syrian Civil War. The CAC-40 was also down, 2.56%, and the English FTSE finished down 1.62%.
If Europe can hold it together, perhaps by announcing an end to austerity, or if something decisive is done about the Syrian refugee problem, markets could rise in the morning. Otherwise it might be another long day.
For a quick roundup of key news and events before the bell, check the daily news section - Markets This Morning.
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