Portugal broke U.S. soccer fans’ hearts earlier this summer. Now it’s causing pain for American investors.
U.S. stocks are down sharply Thursday as jitters about a Portuguese bank and ugly economic data raise more doubts about whether Europe is recovering.
“This has been a horrible day in Europe by recent standards, with peripheral credit concerns once again rearing their head just as core Europe struggles with a decelerating economy,” analysts at Bespoke Investment Group wrote in a note to clients.
Here are five things you need to know about today’s market selloff:
1. By the numbers: Investors hit the brakes on risk assets like stocks, sparking a 160-point selloff on the Dow Jones Industrial Average. The S&P 500 shed 0.9%, while the Nasdaq lost 1.3%.
The losses wipe out a rebound in U.S. stocks from Wednesday that came after the Federal Reserve reassured markets that it is in no hurry to raise interest rates once it’s done tapering in October.
Now the question is: Is this European-fueled slide a blip or indicative of a longer-lasting slump?
“A 5% or 10% correction is a healthy component of any bull market, and that should be considered the worst case scenario,” Bespoke analysts said. “It will take a lot more than a soft patch in global economic data and a bad turn for European equities to break the back of this market in the long run.”
2. Blame Europe! The ugly day began in Europe, where a little known Portuguese bank brought back concerns about the health of the continent’s financial system.
Trading of Espirito Santo Financial Group — the leading shareholder in Portugal’s biggest bank — was suspended. Shares of Banco Espirito Santo plummeted 17% before they were also halted.
But that’s not all that caused European markets to tumble. New reports show industrial production fell sharply in France and Italy, signaling the European economic recovery could be in trouble.
The concerns about Europe mark a sharp reversal from recent months when the continent had been seen as a mild positive to global growth following its sovereign debt crisis.
3. Earnings season in swing: After Alcoa kicked off earnings season earlier this week with a home run, a number of retailers reported mixed results on Thursday.
Family Dollar dipped 2% after the struggling retailer reported a drop in same-store sales and profits. The discounter also dimmed its forecast slightly. But Family Dollar has a plan to lure in shoppers: booze. The company said it will follow Wal-Mart by selling beer and wine in the coming years.
Shares of Tractor Supply Co. slumped almost 6% before the open after the company posted disappointing earnings on Wednesday.
4. More jobs? Americans received another glimmer of hope about the jobs market on Thursday. The Labor Department said initial claims for jobless benefits fell by 11,000 last week to 304,000. That was slightly better than many on Wall Street expected.
The weekly claims report comes on the heels of the June jobs report, which revealed the U.S. added an impressive 288,000 jobs.
5. International markets overview: While Europe is washed in red, Asian markets ended mixed. Markets in Shanghai and Tokyo closed lower, while Hong Kong’s Hang Seng defied the broader trend to finish in positive territory.
Mumbai’s Sensex posted early gains on the release of the first national budget from Prime Minister Narendra Modi and its promise of sharply higher growth. But the index turned negative later.
