Broadgate: Market News 1/3
1st March 2013
Stocks ended flat on Thursday, giving up modest gains late in the session, denying the Dow a chance to inch closer to all-time highs.
The S&P 500 still managed to close out February with a fourth straight month of gains. JC Penney Co Inc was the day’s biggest loser, falling 17 percent to $17.57 after the department store operator reported a steep drop in sales.
The U.S. economy grew slightly in the fourth quarter, a turnaround from an earlier estimate showing contraction, and a drop in new claims for unemployment benefits last week added to a batch of data suggesting the economy continues its sluggish improvement.
The Dow was within striking distance of its record high after a year-to-date advance of more than 7 percent. The Dow’s record closing high, set on October 9, 2007, stands at 14,164.53, while the Dow’s intraday record high, set on October 11, 2007, stands at 14,198.10.
The Dow Jones Transportation Average, seen as a bet on future growth, is up 12.9 percent this year, and the 20-stock index hit a record intraday high earlier on Thursday.
“To push through to new highs, you would have to see consistent positive economic data in the U.S. and have Europe stabilize – those are two pretty big requirements,” said Jeff Morris, head of U.S. equities at Standard Life Investments in Boston.
“It wouldn’t surprise me to see us bounce around as we have the past couple of weeks,” Morris added.
Volume was low for most of the session until quarterly index-rebalancing activity hit the tape at the very close of trading.
After a strong January with gains of more than 5 percent, both the Dow and the S&P 500 found gains tougher to come by in February. Minutes from the Federal Reserve’s January meeting sparked concerns that the central bank may pull back on its stimulus measures sooner than expected, while looming U.S. budget cuts and turbulent Italian elections tempered investors’ aggressiveness.
But concerns about Fed policy were eased by testimony from Fed Chairman Ben Bernanke before a congressional committee earlier this week, as he defended the policy of buying bonds to keep interest rates low to boost growth, despite worries some have about possible inflation.
The Dow Jones industrial average shed 20.88 points, or 0.15 percent, to 14,054.49 at the close. The Standard & Poor’s 500 Index lost 1.31 points, or 0.09 percent, to 1,514.68. The Nasdaq Composite Index fell 2.07 points, or 0.07 percent, to end at 3,160.19.
For the month, the Dow rose 1.4 percent, the S&P 500 gained 1.1 percent and the Nasdaq advanced 0.6 percent.
Limited Brands and Netflix ranked among the best-performing consumer stocks. Shares of Limited Brands, the parent of retailers Victoria’s Secret and Bath & Body Works, gained 2.3 percent to $45.52. The stock of video streaming service Netflix climbed 2 percent to $$188.08.
In contrast, shares of Groupon Inc fell on weak revenue, with the daily deals company’s tumbling 24.3 percent to $4.53.
Cablevision slumped 9.6 percent to $13.99 after the cable provider took a $100 million hit on costs related to Superstorm Sandy and posted deeper video customer losses than expected.
On a positive note, Mylan Inc gained 3.6 percent to $29.61 after the generic drugmaker posted a 25 percent rise in fourth-quarter profit and said it will buy a unit of India’s Strides Arcolab Ltd.
Investors were keeping an eye on the debate in Washington over U.S. government budget cuts that will take effect starting Friday if lawmakers fail to reach agreement on spending and taxes. President Barack Obama and Republican congressional leaders arranged last-ditch talks to prevent the cuts, but expectations were low that any deal would emerge.
Volume was modest with about 6.81 billion shares traded on the New York Stock Exchange, NYSE MKT and Nasdaq, slightly above the daily average of 6.46 billion.
Advancing stocks slightly outnumbered declining ones on the NYSE by 1,518 to 1,446. On the Nasdaq, the decliners had a slight edge, with 1,247 shares falling and 1,201 stocks rising.
The euro steadied in Asian trade on Friday, a day after notching its biggest monthly fall against the dollar in nine months, as investors took slightly disappointing Chinese data in stride.
The single currency’s upside remained capped as political uncertainty in Italy and impending U.S. government spending cuts sapped some investors’ appetite for risk.
China’s February official purchasing managers’ index (PMI) showed manufacturing activity at its slowest pace in four months at 50.1, slightly below a 50.2 Reuters poll consensus and the 50.4 posted in January.
HSBC’s final PMI for the same month showed activity fell to 50.4 after seasonal adjustments from January’s two-year high of 52.3, in line with a flash reading in late February.
“The Chinese data wasn’t as good as some had expected, and while usually risk-off sentiment doesn’t help the euro, it didn’t prove to be a major factor in Asia,” said Ayako Sera, market economist at Sumitomo Mitsui Trust Bank in Tokyo.
“Sentiment toward the euro is calmer but the situation is still unclear in Italy, and investors are waiting for fresh developments there,” she added.
The euro was at $1.3073, up about 0.1 percent and holding above a seven-week low of $1.3018 hit earlier in the week. A break of that level would bring into focus its 2013 low of $1.2998.
The euro lost about 4 percent against its U.S. peer in February, its biggest monthly slide in nine months.
Against the yen, the euro rose 0.2 percent to 121.12 yen, after rising as high as 121.84 earlier in the session.
The yen, usually bought in times of heightened market stress, continued to underperform a day after Prime Minister Shinzo Abe nominated an advocate of aggressive policy action to head the Bank of Japan.
Government data on Friday underscored the challenge faced by the BOJ to vanquish deflation and achieve its new target of 2 percent inflation, with core consumer prices skidding for a third straight month in annual terms in January.
The dollar bought 92.64 yen, up about 0.1 percent and extending a recovery from this week’s fall to 90.85 and heading back towards a 33-month peak of 94.77 set on Monday.
Traders said benign inflation data on Thursday gave the European Central Bank room to cut interest rates, which further diminished the allure of the euro.
“Our economists have revised their view and now expect a 25 basis point cut in the ECB’s refi rate either next week or in April,” said Vassili Serebriakov, a strategist at BNP Paribas.
Serebriakov said this suggested downside risks for the euro and the bank’s trade recommendation for a long position in euro/dollar, established at $1.3180, with a stop-loss order placed at $1.2980.
“However, we would argue that a refi rate cut would probably be least damaging for the euro, as compared to other potential forms of easing such as cutting the deposit rate to negative.”
The common currency had been given a slight reprieve in the middle of this week when a relatively smooth Italian government bond auction helped offset unease about an inconclusive election result.
But comfort from Italy’s successful bond sale was fast fading on concerns that sweeping budget cuts worth $85 billion across U.S. federal government agencies will hit growth in the world’s biggest economy.
The International Monetary Fund has said it will likely cut its U.S. and global growth forecasts if those automatic spending cuts take effect on Friday, and warned that the U.S.’s biggest trading partners would be hardest hit.
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