Concerns about the impact of the Federal Reserve’s rate hike has been replaced as Wall Street was poised for another day of losses — this time due to a weak dollar against the yen. Sliding crude oil prices — pegged at $34 a barrel — also has Wall Street worried.
The dollar tripped up and fell against the yen as investors became worried that the quantitative easing measure by the Bank of Japan lacked teeth. As a result, all the major Asian markets closed down sharply. In the U.S., the Dow Jones Industrial Average fell 155 points, or 0.9 percent, to 17,340 at the opening bell as the S&P 500 shed 0.6 percent to 2,029. Retail stocks were pulled down as the S&P 500 Retailing Industry Group index lost 0.7 percent to 1,277.
The declines in the retail sector mostly ranged from 0.5 percent to 2 precent – which, including Thursday’s losses, erased the gains from the Fed hike rally. At the opening, shares of Bon-Ton Stores Inc. were down 3.1 percent to $1.91 while Ross Stores Inc. was down 1.4 percent to $53.06 and Coach Inc.’s were trading down 1.5 percent to $32.18.
In Europe, the DAX in Frankfurt was trending down 1.2 percent to 10,614 while the CAC 40 in Paris was also off 1.2 percent to 4,624. The FTSE 100 in London was down 0.4 percent to 6,076.
Earlier, the Nikkei 225 in Japan lost 1.9 percent to close at 18,897 while the Hang Seng Index in Hong Kong closed down 0.5 percent to 21,756. The Shanghai index in China finished the day flat.
The Bank of Japan’s monetary policy was described as “supplemental” as it included additional programs and administrative changes. IHS Global Insight analysts said it “does not see the supplement measures as significant changes in the monetary policy and foresees only limited impacts with regard to the bank’s inflation target.” The analysts went on to say that the bank’s measures “are largely intended to allow it more flexibility in its asset purchases and to ease operational difficulties, given that the prolonged slump in oil prices suggest the battle against disinflation will continue for an extended period.”
The decline in crude oil is coupled with anemic earnings growth in the entire energy sector. The S&P Energy Sector EPS Index was down 58 percent for the third quarter. As a result, retailers who had enjoyed robust sales in the shale oil and natural gas boomtowns in Western states are now seeing weakness. But for vendors, the drop in oil is likely reducing raw material costs as well as fuel oil costs throughout the supply chain.