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Broadgate: Market News 25/9

25 September 2012

U.S. stocks edged lower on Monday as a disappointing forecast from Caterpillar and weak German data increased concerns that global growth may remain sluggish.

Minutes before the close, Caterpillar cut its earnings forecast for 2015, citing weakness in the world economy. Its stock fell 0.9 percent to $90.87 and was the top drag on the Dow. After the bell, Caterpillar’s stock lost another 2.1 percent to $88.99.

An index of German business sentiment declined for a fifth consecutive month in September, showing Europe’s strongest economy was moving closer toward recession as the euro zone’s debt crisis remains unresolved.

Concerns about a stalling global economy also were reflected in energy and technology shares, with the S&P energy index down 0.5 percent and the S&P 500 technology index down 0.8 percent.

But the S&P 500 is on track for a 7.6 percent gain for the quarter. Analysts said investors are probably now participating in “window dressing,” where fund managers add some of the latest outperformers to their portfolio.

“Hedge funds remain somewhat short the market, and the end of the quarter is coming up, so I wouldn’t be surprised to see equity markets push a bit higher over the near term,” said Michael Sheldon, chief market strategist of RDM Financial, in Westport, Connecticut.

The gains have largely been tied to central bank stimulus plans. On September 6, the European Central Bank announced its bond-buying plan; a week later, the Federal Reserve unveiled a third round of quantitative easing intended to bolster the economy and reduce U.S. unemployment.

The Dow Jones industrial average declined 20.55 points, or 0.15 percent, to close at 13,558.92. The Standard & Poor’s 500 Index shed 3.26 points, or 0.22 percent, to 1,456.89. The Nasdaq Composite Index dropped 19.18 points, or 0.60 percent, to end at 3,160.78.

Dragging down the Nasdaq, Apple Inc fell 1.3 percent to $690.79 even as its latest iPhone sold out. Concerns arose that the company was unable to produce the new phone quickly enough to meet demand.

Among other high-profile tech decliners, Facebook shares dropped 9.1 percent to $20.79. It was the Nasdaq’s most actively traded stock.

In contrast, shares of Google Inc, the world’s No. 1 search engine, climbed to a record high of $750.04 as analysts said its solid advertising business and its revenue make the company look more attractive compared with once-hot newcomers to the social media scene. Google’s stock closed at $749.38, up 2.1 percent.

In the energy sector, the oil service sector index shed 1.4 percent, while U.S. crude oil declined 1 percent to settle at $91.93. Worries about global demand pushed crude prices down more than 6 percent last week.

For the third quarter so far, the energy sector has performed well, however, with the S&P energy index up 10.6 percent so far.

Shares of home builder Lennar Corp fell 1.5 percent to $36.96 despite reporting steep increases in its third-quarter earnings and revenue.

Lennar’s results follow a similarly strong report from KB Home last week, and together give further evidence the housing market is moving toward recovery.

The housing index is up 61.1 percent for the year so far.

“What we’re watching is the stocks in the sector recover from a very depressed base from a couple of years ago,” said Fred Dickson, chief market strategist at D.A. Davidson & Co. in Lake Oswego, Oregon.

Among the largest decliners on Monday was Peregrine Pharmaceuticals Inc, which plunged 78.5 percent to $1.16 after the company said it found major discrepancies in results from a mid-stage study of its experimental lung cancer drug conducted by a third-party contractor.

Volume was lower than average, with roughly 5.54 billion shares traded on the New York Stock Exchange, the Nasdaq and the Amex, compared with the year-to-date average daily closing volume of 6.54 billion.

Decliners outnumbered advancers on the NYSE by about 3 to 2, and on the Nasdaq, about seven stocks fell for every six that rose

Commodities

Brent crude climbed above $110 a barrel on Tuesday, recovering from a more than 1 percent drop in the previous session, as escalating tensions surrounding Iran offset concerns about weak demand in a still-fragile global economy.

November Brent futures rose 34 cents to $110.15 per barrel at 0248 GMT, while U.S. crude futures gained 39 cents to $92.32 a barrel. Both contracts shed more than $1 on Monday as weak German economic data underlined demand worries.

Gold inched up on Tuesday, consolidating above a 1-1/2-week low hit in the previous session, as expectations for further strength in the metal tied to recent central bank stimulus measures supported sentiment.

Spot gold was little changed at $1,765 an ounce by 0308 GMT, after dropping to a one-week low of $1,755.30 in the previous session.

U.S. gold edged up 0.2 percent to $1,768.

Currencies

The euro fell to a one-week low against the dollar on Tuesday after a short-lived respite in early Asia trade as worries about Spain’s debt persisted and weak German business data fanned fears of slowing growth.

The euro was buying $1.2892 after falling as low as $1.2886, which was its weakest since Sept 13.

Against the yen, the euro was buying 100.26 yen after rising as high as 100.82 yen. The euro dipped as low as 100.24 yen late in the Asian session, its lowest level since September 13.

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.

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