US open: S&P500 erases 2015 gains as Mid-East tensions rattle sentiment

LONDON (ShareCast) - US stock markets fell on Thursday amid growing worries about the recent string of weak economic data and rising tensions in the Middle East. The Dow Jones Industrial Average fell 0.5% to 17661 while the S&P500 index fell 0.4% to 2055. The S&P500 has now erased its gains for 2015 so far, after three years of booking annual double digit gains.

Saudi Arabia's attack on anti-government rebels in Yemen triggered a flight out of riskier assets like equities in favour for safe-haven investments like gold, which rose 0.9% to trade at $1206 per troy ounce.

Gold tends to see capital inflows in times of uncertainty. The CBOE's VIX index which measures volatility and regarded as the best gauge of fear in the market rose 2.7% to stand at 17 Geopolitical tensions aside, market participants were concerned about the string of weaker US economic data following this week's news that inflation is at zero. Thursday's labour market data was better with weekly initial jobless claims falling by 9,000 to 282,000 in the week ending 21 March.

That pushed US government bonds to retreat with the yield on the benchmark 10-year Treasury note at 1.946%, compared with 1.920% on Wednesday. When bond prices fall, their yields rise.

The 10-year yield had fallen to 1.892% during earlier global trade as investors sought safety in Treasury bonds after Saudi Arabia launched airstrikes in Yemen.

In FX markets, the dollar declined 0.3% against the pound and the euro and fell 0.6% against the yen. In oil markets, WTI crude rose 3% to $50.34 a barrel while Brent, the international benchmark, gained 3.5% to $56.23, as worries about the Middle East situation triggered worries about supply, particularly Saudi supply.

In the absence of more US economic data, eyes were on comments from Atlanta Federal Reserve head Dennis Lockhart who said the US central bank will move in a very deliberate fashion when it begins to normalise its monetary policy, so there is little risk that it might be forced to backtrack.

"I take the decision pretty seriously. Once we start, I want to be able to move deliberately," said Lockhart, who regards an initial move at the June, July or September Fed meetings as a high probability.

In company news, data storage solutions producer SanDisk Corp (NasdaqGS: SNDK - news) plummeted 17% after cutting its sales outlook.

Technical athletic apparel retailer Lululemon Athletica (NasdaqGS: LULU - news) rose 4.2% despite reporting a disappointing outlook, while Red Hat (NYSE: RHT - news) jumped almost 8.6% after the software provider reported better-than-expected results late on Wednesday.