Here’s Why Stocks are Crashing

Japan kicked off a global market sell-off Thursday, with the NIKKEI 225 falling off by 7.3% in the session. The WisdomTree Japan Hedged Equity ETF (NYSE: DXJ) is down 5.8% through early afternoon trade. The trouble began with U.S. Federal Reserve Chief’s testimony yesterday and the 2:00 PM release of the FOMC meeting minutes, which indicated the Fed might begin pulling back asset purchase activity this year. Without that fuel, U.S. stocks backtracked into the close, and then today some poor manufacturing data out of China compounded on the situation. The SPDR S&P 500 (NYSE: SPY), SPDR Dow Jones (NYSE: DIA) and PowerShares QQQ (Nasdaq: QQQ) are off between 0.2% and 0.5% heading into the meat of the afternoon. With a long weekend ahead, I would not expect to see strength tomorrow either girls.

Overseas Markets

EUROPE	11:50 AM	ASIA/PACIFIC	CLOSE
EURO STOXX 50	-2.0%	NIKKEI 225	-7.3%
German DAX	-2.1%	Hang Seng	-2.5%
CAC 40	-2.1%	S&P/ASX 200	-2.0%
FTSE 100	-2.1%	Korean KOSPI	-1.2%
Greek ASE	-3.9%	BSE India SENSEX	-1.9%

ECB Chief Mario Draghi takes part in the “Future of Europe in the Global Economy” meeting in London as well.

Economic Events

Jobless claims spiked last week and so investors will be attuned to the Weekly Initial Jobless Claims report, which is due at 8:30 AM ET. Last week’s report covering the period ending May 11 showed weekly claims increased by 32K, to 360K. Economists see claims dropping back to 345K this week. The 4-week moving average increased by 1,250 last week to 339,250.

Manufacturing weakness has been well-documented here, and the PMI Manufacturing Flash Index will add to the picture this morning. Economists expect the index to fall to 50.8 in May, after its last reading for April at 52.1. This figure has been trending lower over recent months. The Kansas City Fed’s Manufacturing Survey is up for report as well at 11:00 AM Thursday morning. The KC Fed’s Index is expected by economists to continue to show regional contraction, though less of it in May, with the consensus forecast set for a reading of -2.0, better than April’s -5.0. Though, economists expected improvement last month as well, and the figure held where it was.

St. Louis Fed-man James Bullard is scheduled to address a group in London at approximately 6:00 AM ET.

We will receive two housing data points as well Thursday, with the FHFA House Price Index and the latest New Home Sales data due. The FHFA House Price Index is expected to show prices rose by 0.9% in March, which would be better than February’s increase of 0.7%. The trend here has been one of accelerating price rise, with January showing a 0.6% increase and December showing a 0.5% rise. Investors can look for the New Home Sales data for April at 10:00 AM. Economists expect the annual pace of sales to have edged up a bit to a pace of 425K in April, from 417K in March.

The Bloomberg Consumer Comfort Index, a weekly measure of the consumer mood, deteriorated by another 0.7 points last week, and reached a mark of -30.2. I expect the index to revisit even lower levels before long. Consumers are not generally in a good mood today, but the latest data from the University of Michigan Consumer Sentiment measure begged to differ, rising last week to 83.7, from 76.4.

Commodity Markets (12:26 PM ET)

WTI Crude	-0.5%
Brent Crude	-0.5%
NYMEX Natural Gas	+0.8%
RBOB Gasoline	-0.1%
Gold Spot	+1.0%
Silver Spot	+0.5%
COMEX Copper	-2.2%
CBOT Corn	+0.9%
CBOT Wheat	+1.9%
CBOT Soybeans	+1.3%
ICE Cocoa	-1.9%
ICE Sugar	+1.2%
ICE Orange Juice Conc.	+1.4%
CME Live Cattle	-0.2%

The EIA’s Natural Gas Report is due Thursday at 10:30 AM. Last week’s report covering the period ending May 10 showed working gas in storage increased by 99 Bcf. Stocks were 694 Bcf less than last year at this time and 83 Bcf below the five-year average for this time of year.

Corporate Events

In corporate news, look for meetings at Johnson & Johnson (NYSE: JNJ), Sempra Energy (NYSE: SRE), Time Warner (NYSE: TWX) and Home Depot (NYSE: HD). Xerox (NYSE: XRX), RF Micro Devices (Nasdaq: RFMD) and Scripps Networks Interactive (NYSE: SNI) are presenting at the Barclay’s Global Technology, Media and Telecommunications Conference. Several companies are coming to market through IPO today, with Ply Gem Holdings, Global Brass & Copper and Holdco all expected to price.

Look for earnings from The Gap (NYSE: GPS), Ross Stores (Nasdaq: ROST), GameStop (NYSE: GME), Ralph Lauren (NYSE: RL), Dollar Tree (Nasdaq: DLTR) and Salesforce.com (NYSE: CRM). Also catch reports from Advance Auto Parts (NYSE: AAP), Aeropostale (NYSE: ARO), Alkermes (Nasdaq: ALKS), America’s CAR-MART (Nasdaq: CRMT), Apollo Investment (Nasdaq: AINV), Bon-Ton Stores (Nasdaq: BONT), BOS Better Online Solutions (Nasdaq: BOSC), Buckle (NYSE: BKE), Cato (Nasdaq: CATO), Cavco Industries (Nasdaq: CVCO), Children’s Place (Nasdaq: PLCE), Columbus McKinnon (Nasdaq: CMCO), Gordman Stores (Nasdaq: GMAN), Hannon Armstrong Sustainable (Nasdaq: HASI), Hormel Foods (NYSE: HRL), Infoblox (Nasdaq: BLOX), ING US (Nasdaq: VOYA), Kirkland’s (Nasdaq: KIRK), Marvell Technology (Nasdaq: MRVL), Mentor Graphics (Nasdaq: MENT), Michael’s Stores (NYSE: MIK), New York & Co. (NYSE: NWY), Nordson (Nasdaq: NDSN), Pactera Technology (Nasdaq: PACT), Pandora Media (NYSE: P), Patterson Cos. (Nasdaq: PDCO), Perry Ellis (Nasdaq: PERY), Quality Systems (Nasdaq: QSII), Ralph Lauren (NYSE: RL), Sears Holding (Nasdaq: SHLD), Shiloh Industries (Nasdaq: SHLO), Ship Finance Int’l (NYSE: SFL), Shoe Carnival (Nasdaq: SCVL), Signet Jewelers (NYSE: SIG), Sport Chalet (Nasdaq: SPCHA), Stein Mart (Nasdaq: SMRT), Taomee Holdings (Nasdaq: TAOM), Taro Pharmaceutical (Nasdaq: TARO), Toro (NYSE: TTC), Trans World Entertainment (Nasdaq: TWMC), UQM Technologies (NYSE: UQM), Williams-Sonoma (NYSE: WSM) and Zumiez (Nasdaq: ZUMZ).

See our recent work at the Wall Street Greek blog and at SA:

Hold Your Nose and Buy Caterpillar Here
A Nightmarish Development in Real Estate Finance
Senate Slams Apple on Tax Avoidance

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.