Market Snapshot: U.S. Stocks Fall on Faltering Economic Recovery
U.S. stocks tumbled for the third straight day as worries intensified over the faltering economic recovery in the U.S. and sovereign debt issues in Europe on the surging cost of protection from Greek default. U.S. data on weekly initial jobless claims showed a 19,000 decline to 457,000, but still well above the level that would signal a sustainable recovery in the labor market. Durable goods orders fell 1.1% in May, however, the details of the report were strong. Despite today’s rather positive economic data, market participants are still digesting the recent string of weak economic data and the Fed’s cautious tone, from yesterday, on the pace of the economic recovery.
Bank stocks fell today on continued concerns over the final version of the financial reform bill with negotiations reaching the final stage over the Volcker rule, which would ban banks from using their own capital to make speculative bets.
The Dow fell 1.41% for the day with all sectors in the red, except for health care, which inched up by 0.12%. Basic materials were down 2.18% as Alcoa shares tumbled 2.8% on intensified worries about the economic recovery. Financials fell 2% led by the banks group, which was down 2.34%, on the uncertainty surrounding the final financial bill that could cut into banks’ profitable businesses.
The S&P 500 fell 1.68% for the day with all ten sectors in negative territory. The broader decline was led by basic materials, which were down 2.4% for the day and consumer services, which fell 2.3% as Bed Bath and Beyond shares slid 5.64% to $39.12 on annual earnings falling short of analysts’ expectations. Energy and financials also shed more than 2% for the day.
In Canada, the S&P/TSX composite index fell 1.16% for the day with all ten sectors in the red. Energy (down 1.56%) and technology (down 1.43%) led the decline.
In Europe, the major European bourses declined for a third day on renewed concern that the sovereign-debt crisis may derail the economic recovery as Greece CDS spreads widened to record highs. The German DAX fell 1.44%; the French CAC 40 fell 2.37%; the London FTSE 100 was down 1.51%; the Spanish IBEX 35 declined 3%; and in Italy, the FTSE MIB Index fell 2%.
Into close, the S&P 500 index fell 18.35 points or 1.68% to close at 1,073.69.
The Dow fell 145.64 points or 1.41% to close at 10,152.8.
The tech-heavy Nasdaq composite index was down 36.81 points, or 1.63% to close at 2,217.42.
On the economic calendar, the U.S. Department of Labor reported that initial unemployment claims fell by 19,000 to reach 457,000 in the week ending on June 19, 2010, after a revised gain of 17,000 in the previous week. The four-week moving average of initial claims fell by 1,500 to reach 462,750. In the week ending on June 12, continuous claims fell by 45,000 to reach 4.55 million, lowering the insured unemployment rate to 3.3% from 3.4% in the previous week.
The U.S. Department of Commerce reported that orders for durable goods fell 1.1% in May 2010 to US$192 billion (up % y/y), after five consecutive gains including a 3% gain in April, according to a June 24, 2010, report from the U.S. Census Bureau. The decline in the headline figure was driven by a US$3.5 billion or 6.9% m/m decrease in orders for transportation, led by a US$3 billion decline in orders for commercial aircraft. Ex-transport orders rose 0.9% in May after falling 0.8% in April. Machinery orders were strong, rising 5.6% m/m after contracting 5.5% in April. Orders for computers and equipment rose 0.1% and primary metals orders rose 0.8%, while orders for fabricated metals contracted 1.2% in May. Orders for autos rose 0.7% after a 2% gain in April. Bookings for capital goods ex-aircraft and military equipment (a measure of future business investment) strengthened in May, rising 2.1% after a 2.7% drop in April. Shipments of these goods, which are included in GDP figures, posted a 1.6% gain after remaining flat in April.
Treasurys prices fell with the yield on the benchmark 10-year Treasury note up yielding 3.13%, up from 3.11% late Wednesday.
In commodity markets, light crude for August delivery settled 16 cents higher at $76.51 a barrel on the New York Mercantile Exchange on the stronger euro.
In currency markets today the dollar fell against the euro on concern over the pace of the economic recovery in the U.S. In currency, EUR/USD traded at 1.2334, up from 1.2270 late on Wednesday in New York, Cable was quoted at 1.4932, up from 1.4811. USD/JPY traded at 89.57, down from 90.53. USD/CHF was at 1.1020, down from 1.1077, while USD/CAD was quoted at 1.0431, up from 1.0290.
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