Global central banks take measures to boost growth
By Laura Mandaro and Polya Lesova, MarketWatch
SAN FRANCISCO (MarketWatch) — U.S. stocks on Thursday dropped to session lows after a report on the services sector of the economy fell short of forecasts, adding to worries about global growth underlined by three central banks’ moves to lower borrowing costs.
The Dow Jones Industrial Average DJIA -0.20% fell as many as 92 points -- versus a 72-point-loss before the data -- and was recently down 69 points, at 12,875, after the Institute for Supply Management said its services index slowed to the weakest level since January 2010. Read more on ISM services.
The biggest decliners in the blue-chip index were banks, with J.P. Morgan Chase & Co. JPM -3.79% down 4.3% and Bank of America Corp. BAC -1.62% down 2.2%. Only three of the Dow’s 30 components were higher, led by McDonald’s Corp. MCD +1.48% .
Stocks had started lower after a flood of non-U.S. central bank actions, which trumped some early, positive U.S. data.
China cut interest rates for the second time in less than a month. In Europe, the Bank of England expanded the size of its quantitative-easing program, while the European Central Bank cut interest rates, as expected. Read more on China rate cuts.
Also, after the ECB cut rates to a record low of 0.75%, the central bank’s president Mario Draghi said downside risks to the euro-area growth outlook have materialized. Read more on ECB, BOE actions.
“The message sent by the coordinated cut in interest rates — China, ECB and BOE — reminded traders that the global economic conditions remain weak,” said Fred Dickson, chief investment strategist at Davidson Cos.
Also weighing, said Dickson, were disappointing reports from U.S. retailers on June same-store sales. Read more on same-store sales.
The S&P 500 index SPX -0.27% declined 8.3 points, or 0.6%, to 1,366, led by financials and energy stocks.
The technology-heavy Nasdaq Composite COMP +0.19% fell 12 points, or 0.4%, to 2,964.
The U.S. dollar rallied against its major rivals, while the euro EURUSD -1.1456% slumped 1.2% to $1.2371. Read more on currencies.
“On days [when] we find the euro dropping significantly, it’s often a sign of risk-off and traders pulling back from cyclical stocks and commodities,” Dickson said.
Positive U.S. data didn’t provide a boost to stocks. The ADP employment report showed that U.S. private-sector payrolls rose by 176,000 in June, well above expectations. Separate data indicated that weekly jobless claims declined by 14,000 last week to 374,000, the lowest level in six weeks. Read more on ADP.
The reports come ahead of Friday’s closely watched jobs report from the Labor Department; economists polled by MarketWatch expect nonfarm payrolls to increase by 100,000 in June compared with 69,000 in May.
Laura Mandaro is a MarketWatch editor, based in San Francisco.
Polya Lesova is MarketWatch's New York deputy bureau chief.
