Fears of additional tightening measures by China to control inflation turned investors jittery on Thursday as markets shed a few points. Lackluster and mixed earnings reports did little to restore investors’ faith. However, positive economic data helped the indices avoid a big fall.
Stronger than expected economic data from China in the fourth quarter of 2010 has led to fears that Beijing is intrude further tightening policies to combat inflation. Investors felt the pinch and the materials and energy sectors dipped lower.
Positive domestic economic data played a major role in preventing indices from taking a bigger fall. The Labor Department reported jobless claims dropped by 37, 000 to 404,000 for the week ending January 15, 2011, the largest such decline since February 2010. According to a report from the National Association of Realtors, existing home sales surged 12.3% in the last month to an annual rate of 5.28 million units and were up from 4.7 million in November 2010. This came in as a surprise as bad weather was expected to negatively impact these figures. Separately, the Conference Board reported an increase of 1% in December in its index of leading economic indicators.
However, the Philadelphia Fed Index which is an indicator of business activity, reported a drop of 19.3 this month and failed to reach economists’ expectations of 19.5. The survey also showed price pressures were building up and the prices paid index jumped to 54.3% in the month registering its highest level since July 2008.
The Dow fell 0.02% and closed at 11,822.8. The tech-laden Nasdaq dropped 0.77% and closed at 2,704.29 to register its biggest two day decline in percentage points since November 12, 2010. The S&P 500 slid 0.13% and ended the day at 1,280.26, recording the biggest two day percentage point loss since November 23, 2010. The CBOE Volatility Index rose to nearly 18. On the New York Stock Exchange, declining stocks overshadowed advancing ones at 18 to 11 and volumes were above average.
On a sectoral basis, energy and materials dragged the markets lower. Shares of Freeport-McMoRan Copper & Gold Inc (NYSE:FCX) dropped 3.7 % and closed at $110.90 after the copper producing company lowered its sales forecast and commented on a possible rise in costs. The other major shares in the sectors to incur losses include Exxon Mobil (NYSE:XOM) which fell 0.6%, Chevron (NYSE:CVX) which dropped 0.3% and aluminum giant Alcoa (NYSE:AA) losing 0.5%.