BackUS stocks decline amid weaker-than-forecast jobs, factory data
Weaker-than-estimated data on hiring and manufacturing reinforced concern that economic growth may be slowing
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New York: US stocks fell, after a ninth straight quarterly gain, as weaker-than-estimated data on hiring and manufacturing reinforced concern that economic growth may be slowing.
American Airlines Group Inc. and United Continental Holdings Inc. slumped 4% after Deutsche Bank cut its ratings on the shares amid concerns about their international business. Boeing Co. dropped 1.6%, while Merck & Co. Inc. slipped 1.6%.
The S&P 500 Index lost 0.3% to 2,061.23 at 11:14 am in New York. The gauge climbed back above its average price for the past 100 days after earlier falling below it. The Dow Jones Industrial Average slid 57.72 points, or 0.3%, to 17,718.40. The Nasdaq Composite Index declined 0.4%.
“We’re still coming out with this idea that the economy’s slowed a bit," said Jim Dunigan, chief investment officer at PNC Bank NA in Philadelphia, which oversees $135 billion. “We’re in no-man’s-land as we start earnings."
Alcoa Inc. unofficially kicks off the earnings season when it reports results on 8 April. Analysts estimate first-quarter profits for S&P 500 companies will decline for the first time since 2009. They had projected earnings growth for the period as recently as January.
Economic data
Companies added 189,000 workers to payrolls in March, figures from Roseland, New Jersey-based ADP Research Institute showed, fewer than the 225,000 economists surveyed by Bloomberg forecast. The data comes before the labour department’s report on Friday in which economists predict nonfarm payrolls rose 245,000 last month with no change to February’s 5.5% unemployment rate.
A separate report showed factories expanded in March at the slowest pace since May 2013, a sign struggling overseas economies and cutbacks among oil producers are hindering US manufacturing. The Institute for Supply Management’s index declined to 51.5 from 52.9 a month earlier.
The S&P 500 fell 0.9% on Tuesday in New York, trimming a ninth quarterly advance in a market that has tripled since 2009. The index’s 0.4% three-month gain trailed most developed markets, with Europe’s benchmark gauge surging 16% and Japan’s Topix index climbing 9.6%.
Nasdaq Composite Index posted its longest quarterly winning streak ever, boosted by biotech stocks. The Nasdaq Biotechnology Index rallied 13% and also posted a nine-quarter winning streak, its longest since 2000.
Airlines slide
Seven of the S&P 500’s 10 main groups fell Wednesday, led for a second day by health-care and industrial companies. The Chicago Board Options Exchange Volatility Index rose 2.3% to 15.64. The gauge, know as the VIX, posted its biggest quarterly decline in two years, down 20%.
A Bloomberg index of US airlines dropped 3.1% after Delta Air, United Continental Holdings Inc. and American Airlines were cut to hold by Deutsche Bank analyst Michael Linenberg. A strong dollar, capacity increases by non-US airlines and slowing global GDP contributed to the downgrade decision.
The Nasdaq Biotechnology Index dropped 1.5%, as Regeneron Pharmaceuticals Inc. and Vertex Pharmaceuticals Inc. retreated 2.4%.
GM slips
General Motors Co. declined 1.6% after March sales fell below analysts’ estimates. Sales dropped 2.4% as a 14% gain in trucks and SUVs couldn’t overcome a 21% decline in cars.
Sears Holdings Corp. rose 5.5% to its highest level in five months after it formed a real estate investment trust that will acquire about 254 of the retailer’s properties, generating more than $2.5 billion in proceeds.
Monsanto Co. rose 3%, the most since June, after the world’s largest seed company reported that plantings of its newest genetically modified soybeans jumped fivefold in 2015 and will double next year. That outweighed concerns about the impact of a stronger dollar on foreign sales and a smaller corn crop this year.
Earlier plunge
Futures on the S&P 500, Dow and Nasdaq 100 Index bounced back from a rapid plunge earlier. At about 9:55 am in Tokyo, S&P 500 E-mini contracts tumbled by as much as 1.3% over a two-minute period before rebounding.
Selling increased just before 10 am in Tokyo, when futures slid below the average price over the past 100 days, with volume about three times higher than the five-day average for that time of the day.
E-mini S&P 500 futures opened 0.1% lower Wednesday at 2,058 and meandered within a four-point range for the first two hours of trading. After 9 am Tokyo time, the contracts began heading steadily lower, before losses snowballed at 9:55 am with an 11.75-point slump in two minutes. More than 13,500 contracts changed hands in that span.
The S&P 500 contract bottomed at 2,033.5, bounced back to 2,048.5 by 10:33 am in Tokyo and pared losses to 2,050 by 3:24 pm.
Support level
The sudden drop in futures may have been triggered after the contract failed to close above a key support level, according to Andy Dodd, a technical analyst and sales trader with Louis Capital Markets. Support refers to an area on a chart where orders may be clustered. The contract tumbled to 2,060.75 on Tuesday, below its 50-day moving average of 2,061.
“Someone may have tried to sell a position or was stopped out and there was simply not enough liquidity due to the time of day," said Dodd. “The long-term uptrend is around that 2,030.75 support level so no surprise it rallied off there." Bloomberg
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