The U.S. stock markets ended Friday with another decline, extending the huge losses recorded by the Nasdaq Composite Index and the S&P 500 yesterday. Today’s drop was driven by signs that hedge fund managers are selling their stockholdings in the best gainers in the bull market. In addition, the markets were also negatively affected by the weak financial results of JPMorgan Chase & Co. (NYSE:JPM). The selloff on the biggest gainers started last week.
Yesterday, the Nasdaq declined more than 3% while the S&P 500 fell over 2% despite data from the Department of Labor showing that the number of people who filed for unemployment benefits dropped to a very low level not seen since before the financial crisis.
A report from Credit Suisse Group AG (NYSE:CS) on April 9 indicated that the number of hedge funds anticipating an upward movement in the stock market declined from 58% to 46% and the net exposure dropped to its lowest level since August of 2012.
Jon Kinderlerer of Credit Suisse wrote, “So far, exposure reductions have been measured and at least for the time being, there has been no mass rush for the exits. Unsurprisingly, we have seen exposure being trimmed the most in information technology where the popular longs have underperformed significantly over the last few weeks.”
In a phone interview with Bloomberg, Randy Frederick, managing director of trading and derivatives at Charles Schwab Corp (NYSE:SCHW) commented, “You need to shake out some of the speculative money and throw water on the irrational exuberance. It’s a good reminder that markets don’t go straight up. While the long-term is positive, we need to have these steps back along the way. We need this kind of pullback.”
- Dow Jones Industrial Average (DJIA)- 16,026.75 (-0.89%)
- S&P 500- 1,815.69 (-0.95 %)
- NASDAQ- 3999.73 (-1.34%)
- Russell 2000- 1,113.72 (-1.24%)
- EURO STOXX 50 Price EUR- 3,116.54 (-1.15%)
- FTSE 100 Index- 6,561.70 (-1.21%)
- Deutsche Borse AG German Stock Index DAX- 9,315.29 (-1.47%)
Asia Pacific Markets
- Nikkei 225- 13,960.05 (-2.38%)
- Hong Kong Hang Seng Index- 23,003.64 (-0.79%)
- Shanghai Shenzhen CSI 300 Index- 2,270.67 (-0.14%)
Stocks in Focus
The stock price of JPMorgan Chase & Co. (NYSE:JPM) declined 3.66% to $55.33 per share after the bank reported weaker-than-expected first quarter earnings. The bank reported that its bond trading revenue declined 21% and mortgage lending revenue fell 84% compared with the same quarter a year ago. JP Morgan posted $5.27 billion net income or $1.28 earnings per share, down by 19% from $6.53 billion or $1.59 a share last year. Its total net revenue dropped 8.5% to $22.99 billion. In a conference call, CEO Jami Dimon said, “It’s not like selling cereal – it’s not like your volumes go up 2 percent every day.”
The shares of Herbalife Ltd. (NYSE:HLF) declined 13.97% to $51.48 per share today on reports that the Federal Bureau of Investigation (FBI) is investigating Herbalife’s marketing tactics, as reported by Bloomberg based on information from a person familiar with the situation. The multilevel marketing company (MLF) that sells nutritional and weight loss products is accused of operating a pyramid scheme by activist investor Bill Ackman. The FTC is also investigating allegations against the company.
General Motors Company (NYSE:GM) fell 4.11% to $31.93 per share, hitting its ten-month low on Friday. It is the first time shares of the company dropped below its $33 IPO price since June last year. The recall issue is undoubtedly affecting the stock, but the company said despite the issue it is expecting to deliver solid core operating performance in the first quarter.