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Broadgate: Market News 25/7

25 July 2012

Wall Street stocks fell on Tuesday, hit by signs the euro zone crisis is worsening and evidence that Europe’s slowdown is hurting U.S. companies, including bellwether UPS.

The decline was the third straight for the S&P 500 index, which tested its 50-day moving average, a technical support level which could trigger more selling if convincingly broken.

Stocks got a lift late in the session after the Wall Street Journal said Federal Reserve officials were moving closer to taking new steps to spur activity and hiring. Fed officials recently have spelled out what measures they might take, including Chairman Ben Bernanke in a speech last week.

After the market’s close, S&P 500 and Nasdaq futures fell on disappointing results from Apple, which reported quarterly revenue below analysts’ expectations. Apple’s shares fell 4.8 percent to $572.12 in extended-hours trading.

During the regular session, United Parcel Service, seen by many as a proxy for economic activity, fell 4.6 percent to $74.34 after reporting quarterly results that missed forecasts and cut its 2012 outlook, citing uncertain global economic conditions. UPS helped pull the Dow Jones Transportation average .DJT down 1.2 percent.

“We are going through an adjustment period where there has been a lot of talk about Europe facing a recession in 2012. Now we are actually seeing it in the earnings and the market is reacting to that,” said Gail Dudack, chief investment strategist at Dudack Research Group in New York.

The struggles of the U.S. and euro zone economies intensified in July, surveys showed on Tuesday. Europe’s private sector looked set for a prolonged slump as the surveys showed the downturn that began in the euro zone’s small economies has since become entrenched in Germany and France.

Concerns about the euro zone grew after Spain was forced to pay the second highest yield on short-term debt since the launch of the euro and European Union officials said Greece had little hope of meeting the terms of its bailout.

AT&T Inc lost 2.1 percent to $34.63 after the company reduced its outlook for business services this year. The S&P telecom index .GSPL dropped 1.8 percent.

Whirlpool Corp slumped 7.5 percent to $62.25 after the world’s largest appliance maker missed Wall Street’s expectations for quarterly earnings and sales, hurt by weak demand in Europe and a stronger dollar.

The Dow Jones industrial average was down 104.14 points, or 0.82 percent, at 12,617.32. The Standard & Poor’s 500 Index was down 12.21 points, or 0.90 percent, at 1,338.31. The Nasdaq Composite Index was down 27.16 points, or 0.94 percent, at 2,862.99.

The Fed says it is still considering a third bout of quantitative easing, or QE3, and some analysts expect recent weakness in the U.S. economy could prompt policymakers to launch such a program as early as September.

“Given the events going on around the world, I think the odds are increasing the Fed will take action at one of the next two meetings,” said Michael Sheldon, chief market strategist, RDM Financial, Westport, Connecticut.

Of the 145 companies in the S&P 500 that have reported earnings for the quarter, 66.9 percent have beaten analysts’ expectations, Thomson Reuters data showed. Over the past four quarters, 68 percent have beaten estimates.

Cisco Systems Inc fell 5.9 percent to $15.12 after VMWare Inc said it would acquire privately held Nicira Inc, a move seen as a threat to Cisco’s core switching and routing business.

In another sign of the economic malaise from Europe, Texas Instruments Inc warned that its third-quarter revenue would be weaker as customers show caution due to global uncertainties. The shares lost 0.9 percent to $26.57.

Spanish five-year government bond yields rose above 10-year yields for the first time since June 2001 as investors fretted about the possibility that Madrid may need a full-blown sovereign bailout. The 10-year note last traded at around 7.6 percent.

Volume was about 6.71 billion shares on the New York Stock Exchange, the Nasdaq and Amex, compared with the year-to-date daily average of 6.74 billion shares.

Decliners beat advancers on the NYSE by about 22 to 7. On the Nasdaq, decliners beat advancers about 17 to 7.


Brent remained steady at $103 a barrel on Wednesday as worries about oil demand from the troubled euro zone and the United States offset any gains to oil prices sparked by concerns about supply from the Middle East.

Brent crude inched up four cents to $103.46 a barrel by 10.57 p.m. EDT while U.S. crude fell 13 cents to $88.37.

Gold inched higher on Tuesday, extending gains into a second straight session as poor economic data from both sides of the Atlantic helped raise hopes for further monetary stimulus measures, which would increase gold’s appeal as an inflation hedge.

Spot gold had inched up 0.2 percent to $1,583.69 per ounce by 0331 GMT, extending gains into a second straight session. The U.S. gold futures contract for August delivery  gained 0.4 percent to $1,583.20.


Euro hovers near 2-year lows as Spanish worries unabated

The euro was stuck near two-year lows on Wednesday in Asia as investors gave it and risk currencies a wide berth after a sell-off in global stocks amid mounting fears debt-ridden Spain might need a bailout.

Rising Spanish borrowing costs are fuelling fears for the region’s stability and European Union officials said Greece had little hope of meeting the terms of its bailout.

This saw the euro, which slumped to a fresh two-year low around $1.2042 the previous session, hover at $1.2052. It remained firmly on track to test the 2010 nadir of $1.1876, analysts said.

Against the yen, the single currency fetched 94.36, having carved out a new 12-year low of 94.12. The euro, though, managed to recoup lost ground against high-beta currencies like the Australian dollar. It was last at A$1.1810, recovering from a dip to A$1.1729.

The information set out herein has been obtained from various public sources and is by way of information only. Broadgate Financial can accept no liability of any sort in relation thereto and readers should obtain their own verification of any statement before making any decision which may have any financial or other impact.

Neither the information nor the opinions herein constitute, or are they to be construed as, an offer or a solicitation of an offer to buy or sell investments.