Asia Morning: US Stocks Drop on Powell's Warning

On Wednesday U.S. stocks dropped for a second session as investors were discouraged by Federal Reserve Chairman Jerome Powell's downbeat comments about the economy...

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On Wednesday U.S. stocks dropped for a second session as investors were discouraged by Federal Reserve Chairman Jerome Powell's downbeat comments about the economy.

Powell warned of an extended period of weak growth and stagnant incomes due to the coronavirus pandemic. And he said additional fiscal stimulus should be provided to prevent long-lasting economic damage.

Meanwhile, the Fed chief stated that the central bank would not push interest rates below zero.

The Dow Jones Industrial Average sank 516 points (-2.2%) to 23,248, the S&P 500 lost 50 points (-1.8%) to 2,820, and the Nasdaq 100 was down 112 points (-1.2%) to 9,000.

Source: GAIN Capital, TradingView

Automobiles & Components (-5.27%), Banks (-4.41%) and Energy (-4.39%) sectors lost the most. 

Coty (COTY -15.5%), National Oilwell Varco (NOV -10.7%), Under Armour (UAA -9.7%), Norwegian Cruise Line (NCLH -7.0%) and (CRM -4.5%) were the top losers. 

On the other hand, BlackRock (BLK +6.9%), Regeneron Pharmaceuticals (REGN +3.5%), Newmont Goldcorp (NEM +2.3%) and Equinix Inc (EQIX +2.3%) posted gains.

On the technical side, about 25.8% (29.9% in the prior session) of stocks in the S&P 500 Index were trading above their 200-day moving average, and 44.4% (64.9% in the prior session) were above their 20-day moving average.

The VIX Index - Wall Street’s fear gauge - rose 2.21 points (+6.7%) to 35.25, the highest level since May 4.

U.S. official data showed that the Producer Prices Index dropped 1.3% on month in April (-0.5% expected).

Later today, Initial Jobless Claims for the week ended May 9 (2.500 million expected) and Import Price Index for April (-3.2% on month expected) will be reported.

European stocks returned to negative territory, with the Stoxx Europe 600 Index losing 1.9%. Germany's DAX sank 2.6%, France's CAC slumped 2.9%, and the U.K.'s FTSE 100 was down 1.5%.

U.S. Treasury prices remained firm, as the benchmark 10-year Treasury yield declined 4.2 basis points to 0.648%.

Spot gold price jumped 13 dollars or 0.8% to $1,715 an ounce.

Oil prices came under pressure as Powell pointed out that the economic outlook was highly uncertain. U.S. WTI crude oil futures (June) slid 1.9% to $25.29 a barrel.

On the forex front, the ICE U.S. Dollar Index gained 0.2% on day to 100.20. Federal Reserve Chairman Jerome Powell said they are not considering negative interest rates, despite a highly uncertain outlook and significant downside risks.

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