This article is from the source 'washpo' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.

You can find the current article at its original source at https://www.washingtonpost.com/business/economy/global-stocks-plunge-as-investors-look-for-safehavens/2016/02/11/68fbd992-d0bd-11e5-88cd-753e80cd29ad_story.html

The article has changed 6 times. There is an RSS feed of changes available.

Version 3 Version 4
U.S. stocks track world markets deeper into the red U.S. stocks track world markets deeper into the red
(about 2 hours later)
Trading in U.S. stocks slipped deeper into the red Thursday morning, as equities markets overseas wobbled and investors worldwide worried about declining oil prices and watched for any signals on U.S. interest rates. Trading in U.S. stocks slipped deeper into the red Thursday afternoon, as equities markets overseas wobbled and investors worldwide worried about declining oil prices and watched for any signals on U.S. interest rates.
Tracking a sell-off in global markets, the Dow Jones industrial average dropped 2.4 percent and the tech-heavy Nasdaq fell 1.6 percent by 11:30 a.m. as Federal Reserve chief Janet Yellen, in the Senate, faced a second day of questions in her semiannual testimony before Congress. Tracking a sell-off in global markets, the Dow Jones industrial average dropped 2.3 percent and the tech-heavy Nasdaq fell 1.3 percent by midafternoon as Federal Reserve chief Janet Yellen, in the Senate, faced a second day of questions in her semiannual testimony before Congress.
On Wednesday, before the House Financial Services Committee, Yellen reiterated her confidence in the U.S. economy. In a public grilling, lawmakers questioned whether the Fed had acted prematurely in increasing its benchmark interest rate in December — the first move from zero since the Great Recession. Yellen emphasized that she didn’t expect the Fed to cut rates anytime soon. Yellen cautioned that the turbulence in markets at home and abroad has led to tighter financial conditions. If those conditions persist, she said, they could dampen U.S. growth. But Yellen pointed to strong hiring and robust consumer spending as signs that the recovery remains resilient and played down the risk that the nation was on the verge of another downturn.
“I think we want to be careful not to jump to a premature conclusion about what is in store for the U.S. economy,” Yellen said. “I would say there is always some chance of a recession in any year, but the evidence suggests that expansions don’t die of old age,” Yellen said Thursday before the Senate committee on banking.
She acknowledged that weakness abroad, especially in China, could pose a risk to the U.S. economy. Yet she also argued that the low rate of unemployment and encouraging data from the auto and residential construction sectors indicate strength in the domestic economy. The Fed raised its benchmark interest rate in December for the first time since the the Great Recession. At the time, the central bank had signaled it planned to hike four more times this year — a forecast that appears increasingly optimistic. Lawmakers grilled Yellen on whether the central bank might cut interest rates instead, or even move them into negative territory, as central banks in Europe, Sweden and Japan have. Yellen indicated that both scenarios were unlikely.
[Lawmakers grill Fed chief in testy hearing on Capitol Hill][Lawmakers grill Fed chief in testy hearing on Capitol Hill]
Investors, though, seem pessimistic. Doubt has emerged over whether the economy will be robust enough to warrant additional increases in the interest rate that Yellen and her colleagues had previously signaled were possible this year. Investors, though, seem pessimistic. Doubt has emerged over whether the economy will be robust enough to warrant additional increases in the interest rate in months to come.
The probability of another rate increase before year’s end has plummeted to just 12 percent, as implied by the hedges that investors are buying against inflation and changing rates. Last week, that figure was above 46 percent. The probability of another rate increase before year’s end has plummeted to just 12 percent, as implied by the hedges that investors are buying against inflation and changing rates. Last week, that figure was above 46 percent, according to Bloomberg.
The news out of Yellen’s first round of testimony failed to calm jitters overseas. Tokyo’s Nikkei 225 declined 2.3 percent Thursday — and is off 17 percent for the year. Hong Kong’s Hang Seng Index fell 3.85 percent. Euro Stoxx 50 was down 2.6 percent. In London, the Financial Times Stock Exchange 100 index was trading 1.7 percent below Wednesday’s close. Indeed, some investors are even betting on a reduction in rates, noted James Bianco, the president of Bianco Research in Chicago.
“It’s a problem with their credibility,” he said of the central bank. “They seem to be talking one way, and the market seems to be pricing in a different way.”
The news out of Yellen’s first round of testimony did nothing to calm jitters overseas. Tokyo’s Nikkei 225 declined 2.3 percent Thursday — and is off 17 percent for the year. Hong Kong’s Hang Seng Index fell 3.8 percent. Euro Stoxx 50 was down 3.9 percent. In London, the Financial Times Stock Exchange 100 index was trading 2.4 percent below Wednesday’s close.
“There’s total confusion right now,” Bianco added.
“We’re far from seeing a turnaround in bearish sentiment, and I think this will dominate markets for a while longer,” said Heinz-Gerd Sonnenschein, a strategist at Deutsche Postbank in Bonn, Germany, according to Bloomberg. “People were looking for catalysts to trigger a lasting rebound, but so far nothing has worked — not earnings season, economic data, central banks or very cheap valuations. Everyone is so nervous.”“We’re far from seeing a turnaround in bearish sentiment, and I think this will dominate markets for a while longer,” said Heinz-Gerd Sonnenschein, a strategist at Deutsche Postbank in Bonn, Germany, according to Bloomberg. “People were looking for catalysts to trigger a lasting rebound, but so far nothing has worked — not earnings season, economic data, central banks or very cheap valuations. Everyone is so nervous.”
Since the beginning of the year, the Chicago Board Options Exchange Volatility Index has increased 44 percent, reflecting the fact that investors are trading in large volumes and are deeply uncertain about the direction of prices.Since the beginning of the year, the Chicago Board Options Exchange Volatility Index has increased 44 percent, reflecting the fact that investors are trading in large volumes and are deeply uncertain about the direction of prices.
[Feeling a little jumpy about the markets? Here’s what’s going on.][Feeling a little jumpy about the markets? Here’s what’s going on.]
By late morning Thursday, oil prices were slumping. Futures for Brent crude oil, the international benchmark, were down 2 percent, indicating pessimism among traders about global demand. In the United States, West Texas Intermediate crude was trading at $26.50 a barrel, or 3.5 percent below Wednesday’s close. By Thursday afternoon, oil prices were slumping. Futures for Brent crude oil, the international benchmark, were down 1.7 percent, indicating pessimism among traders about global demand. In the United States, West Texas Intermediate crude was trading at below $27 a barrel, or 2.9 percent below Wednesday’s close.
Earlier in the day, however, traders bid that benchmark down to within pennies of the cheapest price recorded in the past year, which was $26.19 a barrel on Jan. 20. Earlier in the day, traders bid that benchmark down to within pennies of the cheapest price recorded in the past year, which was $26.19 a barrel on Jan. 20.
Fadel Gheit, an analyst at Oppenheimer & Co., said that prices for crude have tanked as Saudi Arabia — which long constrained production to protect prices — has instead let the oil flow to achieve its geopolitical objectives. Saudi Arabia seeks to counter the influence of Russia and Iran, two rival exporters, in the Middle East, while preventing the nascent U.S. shale industry from expanding further, he said.
Ultimately, Gheit argues, oil prices will increase again given global demand. In the meantime, though, the effects on the domestic U.S. oil industry and the broader domestic economy could be serious. Already this week, questions have emerged about the solvency of firms such as pipeline supplier Chesapeake Energy. Consumers, fearing the effects of oil-sector defaults, aren’t spending the money they’re saving at the pump, according to Gheit.
“People are keeping their savings from oil prices for a rainy day,” he said, “and they think it’s going to rain soon.”