The most dramatic stories in financial markets this month sounded like scenes from a West Coast hipster’s nightmare: Internet shares crashed and burned, computer geeks were accused of rigging the trading game and coffee got a whole lot more expensive.
And don’t even get us started on marijuana stocks.
As the final hours of April tick off the clock, the flat performance in benchmark gauges of stocks and bonds belies the drama seen under the surface. Facebook Inc., one of the poster children of the bull market’s high-flying momentum stocks, entered a bear market and the entire Dow Jones Internet Composite Index threatened to follow. Meanwhile in commodities, rallies in crops and industrial metals stole the show.
While the exact catalyst for the continued rotation away from risk in the stock market remains slippery, the reasons for the commodity moves were clear. Nickel jumped 15 percent, the most since September 2012, on concern tensions between Russia and Ukraine will curb supply. Arabica coffee, Starbucks Corp.’s favorite bean, touched a 26-month high as a drought in Brazil ravaged the crop. The S&P GSCI Total Return Index of raw materials climbed 0.7 percent for a third monthly gain.
In the equities market, the exodus from the most speculative stocks with the highest valuations continued for a second month, even if no one can quite yet figure out why the investing herd chose to start paying attention to P/E ratios in March. Small-cap stocks fared the worst, with the Russell 2000 Index losing 5.1 percent for its worst drop in two years.
The bets favored by hedge funds continued to suffer. The Global X Guru Index ETF, which tracks their top holdings, capped its first back-to-back monthly decline since it was created in 2012.
Financial shares bore some of the worst suffering. The S&P 500 Banks Index was down 5 percent. Talk about stress: Bank of America Corp. slumped 11 percent in the month, its worst drop in two years, after bungling its Federal Reserve stress test so badly it had to suspend plans for a dividend increase and stock buyback.
Anadarko Petroleum Corp. led energy shares to the biggest gain after agreeing to pay $5.15 billion to settle a U.S. claim for $25 billion to clean up 85 years worth of pollution its Kerr-McGee unit left behind.
There were signs of split personality in the technology sector as investors sorted growth from value. Computer hardware and equipment makers in the S&P 500 rose 4.9 percent for the biggest gain among 24 groups as Apple Inc. reached the highest price since 2012 after selling more iPhones than forecast and announcing plans to return more cash to shareholders.
Meanwhile, an index of software and service companies sank 3.1 percent. Twitter Inc. ended the month trading at its lowest price since the day of its initial public offering last year.
All told, the S&P 500 and Dow Jones Industrial Average barely budged in the month while the Nasdaq Composite Index lost 3 percent to cap its first back-to-back monthly decline since 2012.
A similar story played out globally with the MSCI All-Country World Index poised for a 0.3 percent advance in April to eke out a seventh gain in eight months.
Rallies of more than 2 percent in benchmark indexes in Singapore, the U.K. and Norway topped the leader board for developed markets. In an echo of the reversal of fortune for more-speculative growth stories in the U.S., some of the high flyers from earlier in the year posted the biggest losses: indexes in Greece, Portugal and Ireland were down at least 1.9 percent for the month.
In the Treasury market, a rally in 30-year bonds sent yields down seven basis points to 3.49 percent, while 10-year yields lost five basis points to 2.67 percent. The Bloomberg U.S. Dollar Spot Index was 0.7 percent lower in April for a third monthly loss, its longest slump since 2011, after winter weather led to weaker-than-forecast economic growth.
Throughout April, however, news in the markets was dominated not by price moves but by the stray pennies being amassed by computerized high-frequency traders. Michael Lewis’s book “Flash Boys” fueled a month-long debate about the fairness of markets now controlled by algorithms rather than human floor traders in ugly jackets.
The poet T.S. Eliot once wrote that April is the cruelest month. Those algo writers will probably agree this year.