Market Snapshot: U.S. Stocks Post Hefty Monthly Losses
U.S. stocks fell today in a volatile trading session. Early in trading, stocks slid on disappointing economic data that showed that spending remained flat in April, business activity slowed down and consumer sentiment edged up only marginally. The economic data added to the fears that the U.S. economic recovery could be more moderate than expected. Investors’ risk appetite was further undermined after Fitch downgraded Spain to ‘AA+’ from ‘AAA’ with a stable outlook, despite the approval of the austerity package by the Spanish parliament.
Falling commodity prices pushed down energy stocks. This sector, together with financials, led the broad retreat in the three major indices. The Dow lost 122 points after gaining 285 yesterday and restoring its position above the 10,000 mark following a sharp drop on Wednesday. The Dow is 0.56% lower for the week and down 8.23% for May, the first monthly drop in 2010 and the worst performance since February 2009. The S&P 500 managed to inch up 0.16% for the week. However, it declined 8.5% in May, posting its worst monthly performance since February 2009. The Nasdaq is 1.26% up for the week but down 8.7% down for the month.
Today’s trading session concluded a turbulent month for all asset classes as investors responded to the ongoing fiscal deficit crisis in the eurozone. However, market turmoil is likely to continue for some time until policymakers address uncertainties surrounding the resolution of the debt crisis in Europe and its implications for global economy, as well as financial regulation overhaul in the U.S.
Trading volume was also notably thin ahead of a long weekend. The VIX index, a so-called investor “fear gauge,” jumped 8% from 29 to 32.
In Europe, European major bourses finished mixed as worries slightly receded over the sovereign debt crisis: the Spanish IBEX 35 was up 0.97% (-7.3% in May), the German DAX was up 0.15% (-2.27% in Many), the Italian FTSEMIB down 0.8% (-9.4% in May), the French CAC 40 lost 0.3% (-7.1% in May), and the London FTSE 100 was down 0.13% (-7.1% in May).
On the economic calendar, the U.S. Bureau of Economic Analysis reported that personal income grew 0.4% m/m in April 2010, rising US$54.4 billion, after rising 0.4% in March. Disposable personal income in April rose US$57.6 billion, up 0.5% m/m. Real disposable income rose 0.5% in April. Personal disposable income received a boost from tax receipts in April.
Personal spending remained largely flat in April 2010, up US$4 billion. This was its lowest gain in six months, after rising 0.6% in March. Growth in inflation-adjusted spending was less than 0.1% m/m in April, after a 0.5% gain in March. Spending on non-durables contracted by 0.6% m/m in April after rising 0.3% in March, and spending on durables remained flat, while spending on services rose 0.2% in April. The improvement in income and a substantial weakening of consumption in April caused the savings rate to climb to 3.6% from an upward revised 3.1% rate in March.
The Reuters/University of Michigan final index of consumer sentiment edged up to 73.6 in May 2010 from 72.2 in April. The index for current conditions remained unchanged at 81 in May, after a jumping to 82.4 in March from 68.3 in February. The expectations index rose to 68.8 in May from 66.5. The Chicago Business Barometer’s seasonally adjusted three-month average showed an easing in the pace of business activity in May 2010, with the index falling to 59.7 after rising to 63.8 in April. (Readings above 50 indicate expansion.)
Into close, the S& P 500 index fell 13.65 points, or 1.24%% to close a t 1,089.41. The Dow lost 122.36 points, or 1.19% to close at 10,136.63. The tech-heavy Nasdaq composite index was down 20.64 points, or 0.91% to close at 2,257.04.
U.S. Treasurys prices rose with the yield on the benchmark 10-year Treasury note down yielding 3.28%, down from 3.35% from late on Thursday.
Crude for July delivery settled down 58 cents, or 0.8% down, at US$73.97 a barrel on the New York Mercantile Exchange on Spain’s debt downgrade to AA+ from AAA.
In currency markets today the euro lost ground against the yen and dollar as Fitch downgraded Spain’s debt rating. In currency, EUR/USD traded at 1.2267, down from 1.2354 late on Thursday in New York, Cable was quoted at 1.4455, down from 1.4588. USD/JPY traded at 90.91, down from 91.04. USD/CHF was at 1.1594, up from 1.1519, while USD/CAD was quoted at 1.0526, up from 1.0483.
All rights reserved, Roubini GlobalEconomics, LLC
13 Responses to “Market Snapshot: U.S. Stocks Post Hefty Monthly Losses”
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