Stocks fell from Tokyo to New York as central banks showed little will to step up support for flagging economies amid disappointing corporate results. The dollar tumbled the most in six weeks.

While U.S. equities briefly overcame early losses sparked by the Bank of Japan’s surprise decision to refrain from adding to stimulus, the Dow Jones Industrial Average ended Thursday down the most since Feb. 23 as investor Carl Icahn said he sold his stake in Apple Inc. The greenback’s decline sparked gains in commodities, while haven assets jumped, driven by the yen’s steepest advance since 2010. Treasuries extended gains.

“I’ve certainly been surprised by the ability of the market to hang in there with as many mediocre earnings as we’ve seen so far and I think it was too many,” said Michael Antonelli, an institutional equity sales trader and managing director at Robert W. Baird & Co. in Milwaukee. “As a bull, you don’t want to see a late-day selloff after some good morning action. It’s a market that’s just a little worn out.”

David Fuller's view

Wall Street’s influential stock market indices have been losing upside momentum in regions of previous resistance, as this service has been pointing out over the last two weeks.  We saw a good rally from the mid-February lows, helped by some favourable developments.  These included the weaker Dollar Index, now somewhat oversold, and sufficient recoveries in most commodities to suggest their bear markets are over. 

What happens next?

Stock markets generally fall faster than they rise, so there is a risk that we could see a sharp selloff, this time led by the Nasdaq 100 Index.  ‘Iconic’ Apple’s underperformance will not help investor sentiment, which has moved from extremely bearish in mid-February to overly optimistic in mid-April. Seasonal factors are less favourable, on average, from May through October. Corporate profits remain weak, although we only see those through the rear view mirror.  If preliminary evidence does not suggest improving profits for 2Q, as it could since the softer Dollar will help, the mid-February lows for US indices are likely to be challenged. 

Meanwhile, highly cyclical commodities remain this year’s inform sector.