The stock markets in the United States rebounded earlier, but eventually ended the trading session down today. The earlier rebound was driven by the announcement of the People’s Bank of China regarding its decision to reduce its benchmark lending rate to 4.6% and to lower its reserve requirements (RRR) for most big banks to 18%.
“We just saw a crazy evaporation of gains after being up the majority of the day. People are nervous about the potential volatility that could erupt or resurface in the market. They’re not sure what’s going to happen overseas, and that uncertainty is winning out,” said Stephen Carl, principal and head equity trader at Williams Capital Group in an interview with Bloomberg.
The People’s Bank of China made its decision after the yuan currency devaluation and latest data indicated the country’s economic growth is weakening, which ignited concerns about the global economic growth and led to a massive selloff in the equity markets around the world.
China’s central bank said, “Currently, there is still downward pressure on China’s economic growth. There is also big volatility in global financial markets, which require more flexible usage of monetary policy tools.”
Frederic Neumann, co-head of Asian economics research at HSBC Holdings commented that China’s central bank needs to implement additional measures to support the world’s second-largest economy.
Neumann told Blomberg,“A circuit breaker is needed to dispel excessive pessimism and restore confidence. Further support measures in the coming weeks and months will be needed.”
On the other hand, Shane Oliver, head of investment strategy at AMP Capital Investors suggested that China’s central bank will reduce its benchmark lending rate to 4% by the end of 2015. He said, “China’s monetary policy is way too tight. Further easing in both interest rates and the reserve ratio will be needed.”
- Dow Jones Industrial Average (DJIA) – 15,566.44 (-1.29%)
- S&P 500- 1,867.62 (-1.29%)
- NASDAQ- 4,506.49 (-0.44%)
- Russell 2000- 1,107.94 (-0.34%)
- EURO STOXX 50 Price EUR- 3,218.01 (+4.71%)
- FTSE 100 Index- 6,081.34 (+3.09%)
- Deutsche Borse AG German Stock Index DAX- 10,128.12 (+4.97%)
- Nikkei 225- 17,806.70 (-3.96%)
- Hong Kong Hang Seng Index- 21,404.96 (+0.72%)
- Shanghai Shenzhen CSI 300 Index- 3,042.93 (-7.10%)
Stocks in Focus
Best Buy surged more than 12% to $32.96 per share. The electronics retailer posted strong earnings for the second quarter. Best Buy delivered non-GAAP earnings of $0.49 per share, an increase of 16.7% year-over-year. The company’s revenue increased 0.8% to $8.53 billion.
The stock price of Pepco Holdings declined more than 16% to $22.52 per share. The Public Service Commission of Columbia rejected Exelon’s proposal to acquire Pepco Holdings for $27.25 per share. The shares of Exelon also dropped nearly 7% to $30.40 per share today.
Toll Brothers dropped almost 8% to $35.08 per share. The company reported third-quarter earnings below the expectations of Wall Street analysts. Toll Brothers delivered earnings of $0.36 per share, lower than the $0.52 per share estimated by analysts. Its revenue was $1.03 billion compared with the $1.08 billion consensus estimate.