US close: Traders play it safe, buying volatility on the cheap
Initial gains on Wall Street proved short-lived, with what few remaining traders there were focused on hedging their risk ahead of the long holiday weekend - the US president permitting.
And with possibly good reason, given the possibility of 'event risk' over Easter, whether it be in France, in regards to Russia or on the Korean peninsula.
Albeit amid thin trading volumes, the Dow Jones Industrials has lost 0.67% or 138.61 points to 20,453.25, with the S&P 500 erasing 0.68% to 2,328.95 and the Nasdaq Composite down 0.53% to 5,805.15.
Significantly, according to analysts, the VIX volatility closed 1.20% higher at 15.96, just a shade below its intra-day high of 16.22.
"Traders are more focused towards hedging their positions, than anything else. If you look at the VIX index, the recent spike tells you one, and one thing only; investors are taking advantage of cheap volatility index to hedge their risk," said Naeem Aslam, chief market analyst at Think Markets.
Geopolitical concerns continued to rattle investors amid mounting fears of a new weapons test by North Korea as a US carrier group sails towards the area.
Underlining those concerns, earlier on Thursday China's foreign minister warned against either side resorting to force to solve the current impasse on the Korean peninsula.
In parallel, one report indicated that the White House is finding little support among its Asian allies for a military strike against Pyongyang.
From a sector standpoint, the worst performance was in: Aluminium (-3.31%%), Iron&Steel (-2.54%) and for Coal (-1.43%).
The KBW Bank index lost 1.43%, deepening its correction since the start of March.
The Trump Factor
Making traders' task of covering their risk that much harder, overnight US president Donald Trump threw global markets a 'curve ball', telling the Journal the greenback was getting too strong and that he did like a low interest rate policy.
He told The Wall Street Journal: "I think our dollar is getting too strong, and partially that's my fault because people have confidence in me. But that's hurting - that will hurt ultimately."
He added: "It's very, very hard to compete when you have a strong dollar and other countries are devaluing their currency."
His comments had sent US 10-year Treasury note yields down by eight basis points to 2.22% early in London trading, and had the knock-on effect of sending the dollar index down by 0.5% in less than 15 minutes immediately after the report was published.
At the closing bell they were at roughly 2.24% following a short-lived bounce.
Commenting on the US president's remarks, Aslam said: "Many in the market are focused on weakness in the dollar which was hit hard after Trump’s comments.
"[...] Trump wants to keep the interest rate lower, this would aid in gaining some competitive edge in trade relations with other countries. Finally, Trump’s mammoth infrastructure plan would be fueled by debt and lower interest rates would be an ideal situation."
Aslam neverthless also said that Trump had in effect also given his blessing to a second term for Fed chief Janet Yellen.
Banks down despite latest quarterly results
Solid results from JP Morgan Chase and Citi were initially mostly greeted with gains in their share prices, but they have all ended lower.
JP Morgan's first quarter financials blew past the Street's forecasts thanks to robust trading at its Corporate and Investment Banking arm. Net revenues were 6% ahead on the first quarter of 2016 at $25.6bn (consensus: $24.9bn), driven by loan growth and higher interest rates, alongside a 17% jump in profits after tax to $6.448bn.
Heightened trading activity as the interest rate cycle in the US turns boosted Citi's revenues and profits well past analysts' forecasts during the first quarter of 2017. Citi posted top-line growth of 3% in comparison to the year ago period to reach $18.12bn, versus the $17.76bn seen by the analyst consensus.
Wells Fargo's top line growth fell short of Wall Street analysts' expectations in the first quarter, with the bank blaming it on the impact of fewer trading days. America's third largest lender said revenues for the three months to the end of March stood at $22.0bn (consensus: $22.3bn), which was a shade lower than the equivalent year-ago figure of $22.2bn.
Dow Jones - Risers
Visa Inc. (V) $88.87 0.21%
Walt Disney Co. (DIS) $113.20 0.14%
Pfizer Inc. (PFE) $33.88 -0.12%
United Technologies Corp. (UTX) $112.09 -0.13%
Boeing Co. (BA) $175.62 -0.24%
Procter & Gamble Co. (PG) $90.03 -0.31%
Johnson & Johnson (JNJ) $124.99 -0.33%
Coca-Cola Co. (KO) $42.79 -0.35%
Unitedhealth Group Inc. (UNH) $164.96 -0.36%
McDonald's Corp. (MCD) $130.76 -0.38%
Dow Jones - Fallers
Chevron Corp. (CVX) $106.10 -2.63%
Caterpillar Inc. (CAT) $93.10 -1.86%
Exxon Mobil Corp. (XOM) $81.69 -1.54%
E.I. du Pont de Nemours and Co. (DD) $77.44 -1.26%
JP Morgan Chase & Co. (JPM) $84.40 -1.17%
American Express Co. (AXP) $75.80 -1.15%
Goldman Sachs Group Inc. (GS) $223.32 -1.08%
Intel Corp. (INTC) $35.25 -1.07%
Travelers Company Inc. (TRV) $120.53 -0.77%
General Electric Co. (GE) $29.56 -0.71%
S&P 500 - Risers
Alexion Pharmaceuticals Inc. (ALXN) $118.35 3.30%
GameStop Corp. (GME) $22.38 1.40%
Chipotle Mexican Grill Inc. (CMG) $463.62 1.15%
Regeneron Pharmaceuticals Inc. (REGN) $370.37 1.10%
Biogen Inc (BIIB) $271.88 1.10%
Xilinx Inc. (XLNX) $55.68 1.05%
Broadcom Limited (AVGO) $211.32 1.01%
HP Inc (HPQ) $18.20 1.00%
Lennar Corp. Class A (LEN) $51.79 0.97%
Stericycle Inc. (SRCL) $81.92 0.80%
S&P 500 - Fallers
United States Steel Corp. (X) $29.42 -5.89%
Southwestern Energy Co. (SWN) $7.48 -4.96%
Frontier Communications Co. (FTR) $1.94 -4.43%
Chesapeake Energy Corp. (CHK) $5.89 -4.23%
Wells Fargo & Co. (WFC) $51.35 -3.33%
Alcoa Corporation (AA) $30.99 -3.31%
Marathon Oil Corp. (MRO) $15.91 -3.05%
Devon Energy Corp. (DVN) $40.65 -2.91%
Transocean Ltd. (RIG) $11.72 -2.90%
Mattel Inc. (MAT) $25.01 -2.80%
Nasdaq 100 - Risers
Alexion Pharmaceuticals Inc. (ALXN) $118.35 3.30%
Tesla Inc (TSLA) $304.00 2.41%
Incyte Corp. (INCY) $140.84 1.86%
Biomarin Pharmaceutical Inc. (BMRN) $89.91 1.73%
Regeneron Pharmaceuticals Inc. (REGN) $370.37 1.10%
Biogen Inc (BIIB) $271.88 1.10%
Xilinx Inc. (XLNX) $55.68 1.05%
Broadcom Limited (AVGO) $211.32 1.01%
Gilead Sciences Inc. (GILD) $66.51 0.44%
Illumina Inc. (ILMN) $173.68 0.42%
Nasdaq 100 - Fallers
Mattel Inc. (MAT) $25.01 -2.80%
Dish Network Corp. (DISH) $62.38 -2.52%
Liberty Interactive Corporation - Series A Liberty Ventures (LVNTA) $50.87 -2.12%
Nvidia Corp. (NVDA) $95.49 -1.87%
Tractor Supply Company (TSCO) $63.54 -1.66%
Fastenal Co. (FAST) $45.54 -1.62%
PACCAR Inc. (PCAR) $64.63 -1.55%
Discovery Communications Inc. Class C (DISCK) $27.73 -1.46%
Discovery Communications Inc. Class A (DISCA) $28.29 -1.39%
American Airlines Group (AAL) $43.35 -1.39%