NEW YORK (MarketWatch) — U.S. stocks fell Thursday as investors digested news that another earthquake had rocked Japan, less than a month after the country’s worst quake on record.
“It’s another setback in Japan’s long road to recovery,” Jack Ablin, chief investment officer at Harris Private Bank, said of Thursday’s temblor, which follows the March 11 devastating quake and tsunami.
In addition, the ongoing unrest in North Africa and Middle East prompted concern that shipments might be curtailed, pushing crude prices above $110 for the first time in 30 months.
After falling nearly 100 points, the Dow Jones Industrial Average (DJIA 12,409, -17.41, -0.14%) settled off
17.26 points to 12,409.49, with 18 of its 30 components sliding.
The S&P 500 Index (SPX 1,334, -2.03, -0.15%) fell 2.03 points
to 1,333.51, with industrials and utilities the hardest hit of its 10 industry groups.
The Nasdaq Composite Index (COMP 2,796, -3.68, -0.13%) declined 3.68
points to 2,796.14.
On Capitol Hill, the standoff that threatens a government shutdown continued, with House Speaker John Boehner, R-Ohio, and Senate Majority Leader Harry Reid, D-Nev., meeting with President Barack Obama Thursday afternoon.
While the government’s inability to agree on a budget prompted verbal barbs on both sides, the markets “could care less,” Peter Boockvar, equity strategist at Miller Tabak, wrote in an email.
“For perspective, the last time there was a shutdown in late 1994 into early ’95, the stock market also gave it a yawn and in fact rallied about 1% during it,” Boockvar noted.
Reports that a strong quake had struck in Japan also prompted a sharp drop in a major exchange-traded fund that invests in Japanese companies.
Recovering a bit, the iShares MSCI Japan Index Fund (EWJ 9.80, +0.01, +0.10%) was off
0.8%, after falling 1.5% earlier. The nearly $6 billion ETF is down 4.9% for the week so far. Read more about Japan’s ETF.
“My concern is the longer their production is disrupted, the bigger the threat” that production will shift from Japan to neighboring countries, such as Taiwan and South Korea, said Ablin at Harris.
As for the impact on U.S. business, Ablin pointed out that since Japanese consumers purchase nearly 11% of global luxury goods, any hits to its economy “would certainly impact high-end discretionary spending,” such as travel to Hawaii and casinos.
Japan’s ongoing crisis brings near-term disruption to both U.S. and Japanese manufacturers of automobiles and related components, while the longer-term threat is Japan permanently losing production to others.
“In general, there is overcapacity, so if production shifts they’ll lose market share, especially with a strong currency,” added Ablin, referring to the rise of the yen, which makes its goods and services more costly to holders of other currencies.
Benchmark indexes had opened lower as investors considered whether the European Central Bank would continue to raise interest rates to curb inflation.
ECB President Jean-Claude Trichet said the central bank would continue to track inflation risks “very closely” after the first interest-rate hike in almost three years. At a news conference held after the rate announcement, Trichet remarked that it’s not clear yet whether Thursday’s move would be the start of a string of increases. Read more about ECB’s rate move.
The ECB’s quarter-percentage point increase to its main interest rate to 1.25% came one day after Portugal requested a bailout.
Offsetting those concerns, the U.S. government reported its tally of Americans applying for jobless benefits fell by 10,000 last week, with the four-week average declining to its lowest level since July 2008. Read more about jobless claims.
Also, major retailers reported better-than-expected sales at stores open at least a year, with Costco Wholesale Corp. (COST 77.82, +2.83, +3.77%) among those beating Wall
Street estimates. Read about retailers’ March sales results.
On the New York Mercantile Exchange, crude futures for May delivery (CLK11 110.60, +0.30, +0.27%) climbed $1.47 to settle at $110.30 a barrel.
www.marketwatch.com
Thursday, April 7, 2011
U.S. stocks slide after quake hits Japan
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