U.S. stocks faced selling pressure on Thursday and closed at the lows of the day as investors consolidated profits near the end of the month and digested a wave of negative news that kept buyers away and held the market deeply in the red.
Stocks faced their biggest plunge since the end of July and dropped over 1 percent with the Nasdaq leading the indexes lower at -1.94 percent followed by the S&P 500 at -1.62 and the Dow at -1.54 percent.
The day kicked off with weaker than expected durable orders in August from the Department of Commerce that saw a decline of -18.2 percent, a new record, after posting a record increase of 22.5 percent in July.
Later in the morning on Thursday, Bank of England Governor Mark Carney said that the first interest rate hike is “inching closer” before admitting that future increases in borrowing costs are likely to be “gradual and limited”.
A news story surfaced on Thursday from Moscow claiming that a member of Russia’s ruling party was considering a new proposal to allow its courts to seize foreign assets which comes as Russia’s wealthy elite are facing the wrath of international sanctions for annexing Crime in March and supporting armed separatists in eastern Ukraine later in 2014.
Iraq’s new Prime Minister al-Abidi told journalists on Thursday from the U.N. that Iraq has uncovered a plan by Islamic State militants to unleash terrorist attacks in the subways systems in New York and Paris, a claim that U.S. and French authorities have not confirmed.
New York City Mayor Bill de Blasio dismissed the claim and said, “I have a simple message for all New Yorkers. There is no immediate credible threat to our subway system.”
Nevertheless, political leaders in New York have decided to add more police in the subway areas as a precaution.
On Monday China’s Finance Minister Lou Jiwei said that China’s central bank won’t alter its economic policies because of weakness in the economy, suggesting that monetary easing stimulus measures are not likely to occur in the world’s second largest economy even after Chinese industrial production in August slowed to its lowest level since 2008, raising concerns about whether China can reach its annual GDP growth target of 7.5 percent.
Federal Reserve President Bank of Dallas Richard Fischer displayed his true hawkish colors on Thursday before an international audience after he said from Rome that the Federal Reserve may start raising interest rates in the spring of 2015, earlier than the market had expected.
“It’s assumed in the market place that we’ll start our liftoff in raising interest rates some time between the spring and the summer,” Fischer said.
“I won’t say what we’re saying internally, that would not be appropriate, but maybe sooner rather than later,” Fischer continued.
The Federal Reserve is planning to officially end its quantitative easing stimulus program next month and rely on its other form of monetary stimulus that involves holding its short term benchmark interest rates to near zero at .025 percent that hasn’t budged since December 2008 when it was pinned low during the depths of the global recession.
Federal Reserve Chair Janet Yellen and a host of other Fed officials have indicated that short-term interest rates will likely increase sometime in 2015 although the timeline hasn’t exactly been spelled out.
In June the Fed articulated in vague terms that interest rates will remain low for a “considerable time” after its quantitative easing program ends in October.
When questioned by economic reporters during the latest Federal Reserve Meeting in mid September, Fed Chair Yellen said that there is no “mechanical interpretation” for what the term “considerable time” means.
Yellen later explained that the timeline for raising interest rates is “data dependent” and “contingent on the economic outlook”.
On Wednesday Federal Reserve Bank President Charles Evans said that the U.S. Federal Reserve should be “exceptionally patient” in raising interest rates.
“I am very uncomfortable with calls to raise our policy rate sooner than later,” Evans admitted.
Federal Reserve Bank of Atlanta President Dennis Lockhart also repeated that dovish sentiment on Wednesday when he announced during a speech, “I continue to expect conditions for liftoff to ripen by the middle of 2015 or a bit later.”
Federal Reserve Bank of St. Louis President James Bullard carried a different message and sounded more hawkish on Tuesday during a banking conference after he said that his vision of the Fed’s rate hike involves him seeing the Fed raising interest rates sometime early next year.
– Johnathan Schweitzer
Johnathan Schweitzer is a Seattle based writer, editor, and founder of Schweitzfinance.com, focusing on topics related to finance, politics, and technology. He can be reached at firstname.lastname@example.org