Broadgate: Market News 4/4
4 April 2013
Stocks fell on Wednesday, with the S&P 500 index posting its biggest daily decline in more than a month, after a weaker-than-expected survey of private employers raised concerns about the strength of the economy.
News the Pentagon was sending a missile defense system to Guam in the coming weeks and remarks by Defense Secretary Chuck Hagel that North Korea posed a “real and clear” danger added to investor caution.
The ADP National Employment report on private-sector jobs showed less-than-expected hiring in March, which was a worrying sign for investors before the Labor Department’s March non-farm payrolls report on Friday.
Wednesday’s market decline came a day after the benchmark S&P 500 and the Dow finished at record highs. Energy and financial sectors led the day’s fall on the S&P 500, with the S&P 500 financial index down 1.7 percent.
“People continue to push the thesis that the bull market will remain intact as long as housing continues to be strong, and there will be a little doubt put on that thesis if the jobs number Friday is underwhelming,” said Michael James, managing director of equity trading at Wedbush Securities in Los Angeles.
Worries about North Korea added “another risk element to the market,” he said.
Defense company shares gained despite the broader move lower. Shares of Northrop Grumman were up 1.1 percent at $70.18, while shares of General Dynamics were up 2.1 percent at $68.39.
The Dow Jones industrial average was down 111.66 points, or 0.76 percent, at 14,550.35. The Standard & Poor’s 500 Index fell 16.56 points, or 1.05 percent, at 1,553.69, its biggest daily percentage decline since February 25. The Nasdaq Composite Index IXIC was down 36.26 points, or 1.11 percent, at 3,218.60.
The S&P 500, up 8.9 percent since the start of the year, has come close to its intraday record level of 1,576.09 in the past few sessions before pulling back, causing analysts to question if the recent rally is sustainable.
The Dow Jones Transportation Average, seen as a barometer of economic activity, fell 1.3 percent to 6005.95, closing below its 50-day moving average for the first time since November 21.
On Tuesday, decliners beat advancers in the market despite gains in the three major indexes. Also, healthcare, consumer staples and utilities, seen as the S&P’s most defensive sectors, have led this year’s rise on the index.
Energy shares were among Wednesday’s biggest decliners, with U.S. crude oil prices falling 2.8 percent. Shares of Chevron were down 1 percent at $117.78.
Other declining stocks included ConAgra Foods Inc, which fell 1.9 percent to $34.85 after reporting third-quarter earnings that fell 57 percent, though revenue grew.
Monsanto Co rose 0.9 percent to $104.51 after raising its full-year profit forecast.
First-quarter earnings forecasts have been lowered since the start of the year, with S&P 500 company earnings now expected to have risen 1.6 percent in the quarter compared with a year ago, according to Thomson Reuters data. A January 1 forecast put earnings growth at 4.3 percent.
Shares of Zynga Inc surged 15 percent to $3.53 after the company said it would begin offering poker and casino-style games in Britain in partnership with Bwin.party Digital Entertainment.
The ADP report showed U.S. companies hired at the slowest pace in five months, far below what economists had expected, though the February report was revised upward.
The more widely watched U.S. government jobs report, due Friday, is expected to show 200,000 jobs were created last month.
In another report, the Institute for Supply Management’s March services sector index also came in below expectations, with the pace of growth at the lowest level in seven months.
Volume was roughly 7.1 billion shares traded on the New York Stock Exchange, the Nasdaq and the NYSE MKT, compared with the 2012 average daily closing volume of about 6.45 billion.
Decliners outpaced advancers on the NYSE by about 4 to 1 and on the Nasdaq by nearly 3 to 1.
The yen held near one-month highs against the dollar on Thursday, with investors adopting a cautious stance as they waited to see just how aggressive the Bank of Japan will be in tackling deflation.
Having talked up expectations for bold measures, including an immediate start to its open-ended bond buying program, the BOJ will be hard pressed to surprise markets.
Given the BOJ’s track record for under delivering, the market has already trimmed back short yen positions just in case. That is one reason the yen has rallied a little in the past three weeks, coming off multi-year troughs against the dollar and euro.
The greenback fell 0.2 percent so far on Thursday to trade at 92.93 yen, near one-month low of 92.57 hit on Tuesday.
It has lost nearly 4 percent from a 3-1/2 year peak of 96.71 set a few weeks ago.
The dollar/yen looks increasingly vulnerable at least on charts, having pierced below its 55-day moving average for the first time since the yen had started declining in November.
On daily Ichimoku charts, the dollar held above an important support of cloud top, which stood at 92.20 on Thursday and will rise to 92.67 on Friday, though a break there could send a strong bearish signal.
Another support is seen around 92.55, the 23.6 percent retracement of its Nov-March rally.
Should the BOJ disappoint at this meeting, however, Nomura analysts caution that Governor Haruhiko Kuroda is very likely to try to keep expectations high for the next meeting in three weeks.
The outcome of the meeting will be announced between 11:30-01:30 ET, followed by Kuroda’s media briefing at around 2:30 a.m. ET.
“Thus, the press conference is likely to be a good timing of dip buying, if the market is disappointed by the announcement,” Nomura analysts wrote in a client note.
The dollar came under pressure overnight also after disappointing private sector jobs data, which prompted traders to ratchet down their expectations on Friday’s payrolls data.
In addition, U.S. service sector growth falls to the slowest in seven months, denting recent optimism on the U.S. economy.
Also in focus later in the day are policy meetings of the European Central Bank and Bank of England.
Both central banks are not expected to deliver any new stimulus for now, although the ECB is likely to try and calm markets by pledging to keep the banking system lubricated after Cyprus’s brush with financial meltdown.
Still the risk of any surprises, such as an interest rate cut from the ECB or a restart of the BOE’s bond-buying program, is keeping investors wary of the euro and sterling.
The euro was at $1.2845, flat on the day but not far from a four-month trough of $1.2750 plumbed on March 27. Sterling was little changed at $1.5130, having dipped to a two-week low of $1.5075 on Wednesday.
The Australian dollar gained 0.2 percent to $1.0472 on surprise strength Australian retail sales. It stood near its 10-week high of $1.0498 hit on Wednesday but option-related offers at $1.05 were blocking the currency’s further advance.
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