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Broadgate: Market News 26/9

26 September 2012

The S&P 500 suffered its worst day since June on Tuesday, pulled lower by Caterpillar Inc after it cut its profit outlook, the latest high-profile company to warn about profit growth.

Technology shares came under pressure after a second day of weakness for Apple Inc, the world’s most valuable public company. Shares fell 2.5 percent to $673.54 as the company sold out of its initial supply of the new iPhone, raising concerns about keeping up with demand.

Caterpillar, the heavy equipment maker, said on Monday sluggish global growth was responsible for reduced estimates. Other companies to recently cut expectations include FedEx Corp and Norfolk Southern.

Shares of Caterpilar were the biggest weight on the Dow for a second day and ended down 4.2 percent at $87.01. That was the stock’s biggest daily percentage drop since May.

Tuesday’s decline reversed earlier gains attributed to portfolio “window dressing” as the quarter ends. Stronger-than-expected figures on U.S. consumer confidence also contributed to temporary gains.

This is “a market that has rallied and climbed a wall of worry. Right now the market is getting skittish and looking for reasons for buyers to be less aggressive,” said Jim Fehrenbach, head of equity distribution at Piper Jaffray in Minneapolis.

The Dow Jones industrial average was down 101.37 points, or 0.75 percent, at 13,457.55. The Standard & Poor’s 500 Index was down 15.30 points, or 1.05 percent, at 1,441.59, its fourth day of losses. The Nasdaq Composite Index was down 43.06 points, or 1.36 percent, at 3,117.73.

It was the S&P 500’s biggest percentage daily loss since June 25 and the biggest for the Nasdaq since July 20.

The S&P 500 is up 2.5 percent so far in September, historically a difficult month for the market, and recently hit the highest level in nearly five-years.

For the quarter, the S&P is up 5.8 percent so far, with gains largely tied to the latest moves by the European Central Bank and the U.S. Federal Reserve to stimulate their economies.

San Francisco Fed President John Williams said on Monday he expected the central bank to expand its bond-buying program next year to more aggressively combat the unemployment rate, but Philadelphia Fed President Charles Plosser countered on Tuesday saying that the latest monetary stimulus will not do much to boost economic growth or lower unemployment.

Economic data from the Conference Board showed U.S. consumer confidence jumped to its highest in seven months in September.

Two separate reports showed home prices rose for another month in July, though the gains were not as strong as the previous month.

Red Hat dropped 4.3 percent to $55.08 after the world’s largest distributor of Linux operating software reported a lower-than-expected adjusted profit and lowered the top end of its full-year revenue outlook.

Volume was roughly 6.75 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 11 to 4, and on the Nasdaq by about 2 to 1.

Commodities

Brent crude slipped below $110 per barrel on Wednesday, weighed down by worries that a fragile global economy could hit demand, although the risk of disruptions to supply from rising tensions between Iran and Western nations kept losses in check.

Front-month Brent futures had fallen 67 cents to $109.75 a barrel by 0625 GMT, their second drop in three days.

U.S. crude declined 72 cents to $90.65 per barrel, not far off its two-month low of $90.57 marked on Tuesday.

Gold edged up on Wednesday as recent stimulus measures by central banks supported bullion’s appeal as a hedge against inflation, although a firm dollar and a shift in investor focus to the euro zone debt crisis capped gains.

Spot gold inched up 0.1 percent to $1,762.19 an ounce by 0643 GMT, after two sessions of losses. U.S. gold traded nearly flat at $1,765.10.

Currencies

The euro fell to a two-week low against the dollar on Wednesday, dragged down by mounting worries about Spain’s reluctance to request a bailout even as anti-government protests turned violent.

The single currency fell 0.3 percent to $1.2863, having dipped to $1.2856 at one point, its lowest level in two weeks. It has come back under pressure after hitting the four-month high near $1.3173 early last week.

Any rise in the euro to levels above $1.30 is likely to be short-lived, and the single currency will probably have a hard time staying above 100 yen, he added.

The euro fell 0.4 percent against the Japanese currency to 99.99 yen, having retreated from an intraday high of 100.46 yen.

Against the dollar, possible support for the euro lies near $1.2826, its 200-day moving average.

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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