What Happened While the Market Nosedived
Apr 9th 2012 10:08PM
Updated Apr 9th 2012 10:10PM
Investors got what was expected after a poor showing in last Friday's jobs data. Major indices such as the Dow Jones Industrial Average (INDEX: ^DJI) fell 1%, and the iPath S&P 500 VIX Short-Term Futures ETN (NYS: VXX) jumped 6.3% while reacting to Friday's news that nonfarm payrolls additions were reported at 120,000, half of the previous month's 240,000.
Off the financial cliff
Leading the markets' decline were financial stocks, with Bank of America (NYS: BAC) claiming the largest percentage drop of Dow components at 2.7%. With fear increasing of a slower economy, Bank of America continued its volatile streak, as described by Fool analyst Anand Chokkavelu. Out of this year's 66 trading days, Bank of America's share price has jumped or fallen by more than 1% 48 times.
China's rising prices
Today, China reported a consumer price index increase of 3.6% for March, up from 3.2% in February. Food prices, which make up a third of the index, increased 7.5%, with bad weather for vegetables cited as a major reason for the higher-priced food. This was not welcome news for China's slowing economy, which just recently posted shaky manufacturing orders based on the Purchasing Managers Index (PMI). While the government's PMI showed expansion in manufacturing, a survey by HSBC showed contraction. With higher inflation, investors fear that China's government would delay any plans to stimulate growth. Both markets in Asia and ETFs such as iShares MSCI Emerging Markets Index (NYS: EEM) , which has more than 26% of its fund invested in China, fell today.
Oil eases off the gas
Oil prices headed downward today on the fears of a slower economy, along with a possible resolution to Iran's nuclear ambitions. Iran and the U.N. Security Council will begin talks this Friday in Istanbul, with Iran hoping to ease the sanctions in place against it, and the Security Council looking to end Iran's enrichment of uranium that could lead to nuclear weapons. While oil prices regained most of the early decline and ended down only 0.04%, ExxonMobil (NYS: XOM) fell 1.1%, along with other energy-related companies.
With Facebook readying its shares for trading in May, the social network just purchased the popular mobile-photo company Instagram for $1 billion. Instagram has more than 30 million users and just closed a fundraising round that valued it at $500 million. For potential Facebook investors, it's either a sign that Facebook won't be afraid to pay a premium for good acquisitions, or that it will overpay to maintain social dominance.
Patents to go
Also reported today, Microsoft purchased more than 800 patents from AOL for just a little over one Instagram, or $1.1 billion. AOL plans to "return a significant portion of the sale proceeds to shareholders," and with that news, shares of AOL jumped more than 40%. AOL will still have 300 patents that cover "advertising, search, content generation/management, social networking, mapping, multimedia/streaming, and security."
Sony slings pink slips
Japanese consumer-electronics company Sony will slash 10,000 jobs, some of which will come from a chemical-products division that it agreed to sell last month and an LCD division that it spun off. This comes after a third-quarter in which Sony lost more than $2 billion, with sales down more than 12% over the last year. Beginning this month, Sony also implemented a new management structure, which positions "digital imaging, game, and mobile as the three core pillars of its electronics business."
Looking forward this week
Tomorrow, Alcoa will release first-quarter earnings, while on Friday JP Morgan Chase will report its earnings and the U.S. consumer price index for March will be released.
While each bit of news moves the markets, try keeping your sanity and understand that a long-term investing approach should not be altered by a volatile day of trading. For greater insight into a company built for the long haul, check out our free report on The Motley Fool's Top Stock for 2012.
At the time this article was published Fool contributor Dan Newman owns shares of ExxonMobil. He holds no shares of the other companies mentioned above. Follow him on Twitter, where he goes by @TMFHelloNewman. The Motley Fool owns shares of Bank of America, Microsoft, and JPMorgan Chase. Motley Fool newsletter services have recommended buying shares of Microsoft and ExxonMobil and creating a bull call spread position in Microsoft. The Motley Fool has a disclosure policy. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.
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