Date Published: 05/05/10
Stocks resume slide as EU worries linger
Stocks, commodities, and the euro stumbled as investors braced for a long period of uncertainty about European credit that could translate into a weaker global economic recovery than anticipated.
Violent protests in Greece over recently announced austerity measures left traders worried that the country's debt crisis, which has already dragged on since November, may yet be tougher to resolve than expected. Meanwhile, Moody's Investors Service placed Portugal's credit rating under review for a possible downgrade, citing the deterioration of the country's public finances and the long-term economic challenges it faces.
Traders work on the floor of the New York Stock Exchange in New York yesterday, as U.S. equities tumbled the most since February and European stocks erased their 2010 gain.
New employment data in the U.S. were upbeat and helped to keep the stock market's losses in check through much of the session. But for now, investors' bigger concern remains the creditworthiness of Europe, which is facing its biggest test since the launch of the euro more than a decade ago.
"The situation we're looking at in Europe has become this wild card that's gotten even bullish people concerned at this point," said Phil Dow, director of equity strategy at RBC Wealth Management. "We're into uncharted territory."
That uncertainty pushed the Dow Jones Industrial Average down 59.94 points, or 0.6%, to 10866.83, marking its second straight decline. The Nasdaq Composite Index tumbled 0.9%. The S&P 500 fell 0.7%, led by declines of more than 1.4% each in its industrial, consumer-discretionary, and energy sectors.
Automatic Data Processing's report on U.S. private-sector employment showed employers added 30,000 jobs in April, slightly more than economists were expecting.
Other data showed the U.S. non-manufacturing sector expanded in April at the same pace as in March, but employment within the broad sector remained weak.
Some traders worried that demand for raw materials might be peaking, a scenario that was also underscored by the Energy Information Administration's reading of U.S. oil reserves, which showed a weekly increase almost double what analysts were anticipating.
"The inventory data were very bearish, and when you add that to the spreading concern about Europe, it becomes very difficult to make a case why we don't have plenty of oil for the moment," said Phil Flynn, energy analyst at PFGBest Research in Chicago.
Oil futures fell for a second straight day, tumbling $2.77, or 3.4%, to $79.97 a barrel, the lowest finish since mid-March. The commodity has tumbled 7.2% over the past two days.
Stock-market volume, which has been strong during the volatile run in major indexes lately, was again above the daily average for 2010. Composite activity in New York Stock Exchange-listed companies hit 6.9 billion shares.
Among stocks to watch, Merck slipped 0.6% after Goldman Sachs downgraded the pharma giant to "neutral" from "conviction buy" and lowered its major pharma sector rating to "neutral" from "attractive," citing disappointment with post-merger earnings.
Walgreen gained 1.7% after its same-store sales declined less than analysts were expecting.
InterContinentalExchange rose 4.9% after its first-quarter earnings rose a bigger-than-expected 40%.
Garmin slid 8.8%. The maker of digital navigation products reported its first-quarter profit fell 23%, missing analysts' expectations.
American International Group declined 1.4% as U.K. insurer Prudential PLC's $35.5 billion deal to buy AIG's Asian insurance assets hangs in the balance. Prudential delayed a planned $20 billion rights issue because of unresolved talks with the U.K.'s Financial Services Authority about its capital position. Prudential said it expects to price and launch the rights issue after its talks with the FSA, but didn't say when that would be.
The euro hit a 14-month low versus the dollar. The U.S. Dollar Index rose 1%.
Treasury prices rose, pushing the benchmark 10-year note's yield to 3.546%.
Courtesy WSJ |
