Stocks Pare Losses After Quake Triggers Plunge

Stocks pared losses but remained weak after news of a 7.1-magnitude earthquake in northern Japan.

The Dow Jones Industrial Average fell more than 35 points, after dropping nearly 100 immediately after news of the quake. The blue-chip index, which rose slightly on Wednesday to the highest level since June 2008,has fluctuated between a loss of 30 to 100 points since news of the quake.

Among Dow components, General Electric , DuPontand Disney fell, while Boeing and Home Depot gained.

The S&P 500 and the Nasdaq also fell, but were off their lows of the session. The CBOE Volatility Index, widely considered the best gauge of fear in the market, rose above 17.

Among key S&P 500 sectors, telecom, industrials and utilities fell.

The earthquake hitan area 60 miles east of Sendai and 90 miles from Fukushima, near the area devastated by a March 11 earthquake and tsuanmi. Of the hundreds of aftershocks that have followed the earlier quake, none have been 7.0 or stronger.

The earthquake, initially thought to be of a 7.4 magnitude, initially triggered a tsunami warning that has since been lifted.

One reason stock plunged, and continue to trade lower, is the new quake was a reminder as earnings season begins that investors still don't know the full effects of the first quake, said Doreen Mogavero of Mogavero & Lee.

"I think there is a real reason to be concerned how the Japanese economy will effect the rest of the world," Mogavero said, adding that it's not surprising stock prices continue to drop.

"Looking at rate hikes, inflation fears, oil crossing to $109...there are a myriad of things that would cause someone who has made a lot of money off the table," she said.

Before news of the quake, stocks were trading in a narrow range around zero, as the market took a pause after the Dow broke through to a new high on Thursday, and the S&P 500 broke above 1,333, a recent resistance point, largely because investors expect first quarter earnings to be strong, according to Marc Pado, market strategist and technical analyst at Cantor Fitzgerald.

The broad market index hit a high of just under 1,344 on Feb. 18, and remains below that level in part because of the performance of bank stocks, which make up a signfiicant percentage of the index, Pado said.

Investors had expected the Federal Reserve to give more banks clearance to give cash back to shareholders in the form of dividends and buybacks in February, and were disappointed when institutions such as Bank of America didn't get a thumbs up.

"There’s an industry specific issue that’s holding the S&P back," Pado said.

Shares of most airline companies fell after the news, include AMR , United Continental and Delta Air Lines .

Retail sales data at stores open at least a year, or same-store sales, came in better-than-expected in March. Shares of Walgreen, Costco and teen clothing retailers Hot Topic and Zumiez gained after reporting strong March sales.

But not all retailers delivered upbeat March sales. Gap disappointed, as March sales fell 10 percent from a year ago.

Bed, Bath & Beyond, meanwhile, soared after the home goods retailer reported a 25 percent boost in fiscal fourth-quarter earnings after the market closed on Wednesday. And Pier 1 Imports jumped after the home furnishing chain delivered a 65 percent gain in fiscal fourth-quarter profits.

Rite Aid gained after reporting a smaller fourth-quarter loss than a year ago amid signs revenue at the drugstore chain in stabilizing after falling for two years.

PNC Financial Services traded flat despite a 250 percent boost in its dividend.

Oil prices first fell, and then rose, after news of the quake, as traders absorbed news that hte quake was not as strong as one on March 11.

London Brent crude fell below $122 a barrel, while U.S. light crude fell below $109 a barrel, after hitting that level on Wednesday.

Ingersoll-Rand gained after announcing it would raise its dividend by 71 percent and buy back up to $2 billion in shares.

The consumer credit report is due at 3 p.m., with analysts expecting consumer credit to have increased to $2.5 billion in February, said.

In economic news Thursday, initial claims for unemploymentfell 10,000 to 382,000 from an upwardly revised 392,000, the Labor Department reported. The government had reported claims last week had fallen to 388,000, and economists surveyed by Reuters had expected claims would fall to 385,000 last week.

The four-week moving average of unemployment claims fell by 5,750 to 389,500.

The European Central Bank, meanwhile, raised interest rates 25 basis pointsto 1.25 percent on Thursday, in response to rising inflation in the euro zone.

The decision comes in the wake of Portugal’s late call Wednesday for financial aidfrom the European Union for its stricken economy after yields on Portugal's five- and 10-year government debt widened to 9.7 percent. Portugal is expected to formally ask for aid today.

The Bank of England, meanwhile, held interest rates at 0.5 percent on Thursday, although inflation is rising in England as well.

Negotiations were set to continue on the U.S. budget Thursday following all night discussions described by President Barrack Obama as “constructive” even though an agreement hasn't been reached. The government has been using a House Continuing Resolution since October but President Obama has ruled out extending this option.

Both sides have until midnight on Friday to finalize the Budget before the U.S. government officially runs out of money leading to a government shutdown, which would affect social security payments and lead to the closure of government buildings and offices.

On Tap This Week:

THURSDAY: Monthly chain-store sales, consumer credit, money supply; Lacker speaks.
FRIDAY: Wholesale trade.

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