The China stock market on Wednesday finally saw an end to the winning streak that had hit seven sessions and enabled the market to collect more than 210 points or 10 percent along the way. The Shanghai Composite Index slid below support at 2,300 points, although investors are optimistic that the market may recover that level at the opening of trade on Thursday.
The global forecast for the Asian markets is fairly upbeat, thanks to some better than expected economic data out of the United States. The financial stocks, after experiencing a mild correction in the previous session, are expected to resume their upward movement to provide support for the markets. The European markets finished higher across the board, as did the U.S. markets - and the Asian markets are expected to do the same.
The SCI finished sharply lower on Wednesday as investors locked in gains from the recent winning streak. The financial stocks were especially hard hit, while the commodities also fell under heavy selling pressure.
For the day, the index dropped 46.86 points or 2 percent to close at 2291.55 after trading between 2,291.36 and 2,355.69. The Shenzhen Index lost 2.2 percent to close at 757.07.
Among the decliners, Aluminum Corp. of China (Chalco) was off 2.6 percent, while Jiangxi Copper shed 1 percent, Industrial & Commercial Bank of China lost 1.6 percent, Bank of China lost 2.3 percent and China Construction Bank fell 1.9 percent.
The lead from Wall Street is positive as stocks experienced considerable volatility over the course of the trading session on Wednesday, with the major averages eventually ending the session firmly in positive territory. The choppy trading came as traders digested some strong economic data combined with weak demand for a U.S. treasury auction.
Some initial buying interest was generated by a report from the Commerce Department revealing that durable goods orders unexpectedly showed a substantial increase in the month of February after falling in each of the six previous months. The report showed that durable goods orders jumped 3.4 percent in February after falling by a revised 7.3 percent in January. Economists had been expecting durable goods orders to fall by 2.5 percent compared to the 4.5 percent decrease that had been reported for the previous month.
The markets saw some further upside after the Commerce Department released a separate report showing an unexpected increase in new home sales in the month of February. This marked the latest in recent string of positive housing market data. The Commerce Department said that new home sales rose 4.7 percent to an annual rate of 337,000 in February from an upwardly revised January rate of 322,000. The results surprised economists, who had been expecting sales to fall to 300,000 from the 309,000 originally reported for the previous month.
Stocks were unable to sustain the upward move, however, as investors remained skeptical that the better than expected data signals a turnaround for the economy. After hovering in positive territory for much of the morning, stocks showed a substantial turnaround over the course of the afternoon amid a negative reaction to the release of the results of the Treasury Department's auction of $34 billion worth of five-year notes. The auction drew a yield of 1.849 percent and a bid-to-cover ratio of 2.02.
With the bid-to-cover ratio, an indicator of demand, coming in below the 2.21 from the Treasury's previous auction of $32 billion in five-year notes last month, the auction results raised some concerns about demand for U.S. government debt. The major averages subsequently pulled back well off their highs and into the red.
Nonetheless, stocks moved back to the upside going into the close, lifting the major averages back into positive territory. The Dow closed up 89.84 points or 1.2 percent at 7,749.81, the Nasdaq closed up 12.43 points or 0.8 percent at 1,528.95 and the S&P 500 closed up 7.63 points or 1 percent at 813.88.
In corporate news, research and development outsourcing company WuXi PharmaTech, Inc. on Wednesday reported a swing to loss in the fourth quarter, primarily reflecting non-cash impairment charges relating to continuing and discontinued AppTec operations. The Shanghai, China based-company's net loss for the fourth quarter was $93.85 million or $1.42 per ADS, compared with a profit of $12.13 million or $0.17 per ADS in the prior year quarter. Loss from continuing operations for the quarter was $49.23 million or $0.74 per ADS, compared with a profit of $12.13 million or $0.17 per share last year quarter.
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