U.S. data worry investors ahead of monthly jobs report Friday
U.S. stocks extended losses for a second session on Wednesday as disappointing ADP private sector employment data had investors worried about the release of the all-important monthly jobs report on Friday.
Within a half an hour to market close, the Dow was down 188 points at 14,990, crossing below the 15,000 mark, while the Nasdaq fell 37 points to 3,408 and the S&P 500 shed 18 points to 1,613.
On Wednesday, economic reports were flowing, with ADP starting the day off with a disappointment. The report showed that the U.S. added 135,000 private sector jobs in May, far lower than the 171,000 consensus estimate, easing fears that the Fed will start slowing its bond buying program faster than expected. The report is a closely watched indicator of the all-important monthly jobs data due out Friday, which is expected to show that 167,000 jobs were added in May.
Shortly after, the government released the second of three updates on productivity, with productivity growth for the first quarter revised lower to 0.5% from 0.7% - in line with expectations.
At 10:00 am ET, the Institute for Supply Management said its May survey of purchasing managers in the services industry edged up to 53.7% in May from 53.1% in April, slightly lower than the 54% reading expected.
The Commerce Department also reported that factory orders in the U.S. rose 1% in April on demand for autos and airplanes, lower than the expected rise of 1.6%. Excluding transportation, orders fell 0.1%.
Finally, at 2:00pm ET, the Fed's Beige Book showed that the U.S. economy is still growing at a "modest to moderate" pace, with the Dallas Fed the only exception of the 12 districts having reported "strong" economic growth. In contrast to some regional Fed reports, the Beige Book showed the manufacturing sector expanded in most districts.
The latest Beige Book covered the period from early April to late May, compared to the prior Beige Book that covered from late February to early April and reported a "moderate" pace of growth.
In the previous session, U.S. markets ended lower, with the Dow industrials breaking a 20 straight session win streak for the benchmark index on Tuesdays, finishing down 76.49 points at 15,177.54 as worries over the exit from the Fed's quantitative easing program and comments from the central bank weighed on investors.
Abroad, losses in Japanese stocks also weighed on investers Wednesday, with the Nikkei Stock Average (TYO:JP:NIK) plummeting 3.8% after Prime Minister Shinzo Abe's plan to boost long-term growth disappointed markets.
In corporate news, Salesforce.com Inc. (NYSE:CRM) shares gained 0.5% Wednesday, a day after the company agreed to acquire ExactTarget (NYSE:ET) for $2.5 billion, with Citi analyst Walter Pritchard saying he continues to believe the company "is emerging as the leader in the next-generation of 'front office' applications". The stock was also added to Goldman Sachs' conviction buy list.
Elsewhere, the Treasury Department said Wednesday it plans to sell 30 million shares of General Motors (NYSE:GM), with the sale to coincide with the company's inclusion in the Standard & Poor's 500 index as of market close on Thursday. The UAW Retiree Medical Benefits Trust also said it plans to sell 20 million shares. Shares fell 2% after gaining 1.57% on Tuesday.
Dell Inc. (NASDAQ:DELL), a personal computer maker, fluctuated after a board committee said that billionaire Carl Icahn’s takeover offer is deficient because of a projected $3.9 billion shortfall in liquidity needed to pay a proposed dividend and run the company. The committee proposed stockholders vote for the Silver Lake and Michael Dell offer at a meeting set for July 18.
Apple Inc. (NASDAQ:AAPL) slipped 0.87% after a U.S. trade agency said it infringed a patent owned by Samsung Electronics Co., possibly leading to a ban on imports of some older Apple products. The International Trade Commission’s decision was the first patent ruling against Apple in the U.S. that affects product sales. It covers the iPhone 4 and iPad 2 3G sold for use on networks operated by AT&T Inc., T-Mobile US Inc. and two regional carriers, General Communication Inc. in Alaska and CT Cube LP in Texas. The order is subject to review by President Barack Obama.
Oil for July delivery rose 0.5 percent to finish at $93.74 a barrel after the Energy Information Administration said supplies fell 6.27 million barrels to 391.3 million last week. August gold added 0.1 percent to close at $1,398.50 an ounce on the Comex division of the New York Mercantile Exchange, amid the disappointing jobs data and declining equities.
European markets finished sharply lower today with shares in London leading the region. The FTSE 100 was down 2.12% while France's CAC 40 was off 1.87% and Germany's DAX fell lower by 1.20%.