While you were sleeping: Gap shares slide

Wednesday 10th August 2016

Wall Street was mixed along with the latest US economic data, while oil prices moved lower as did the greenback, though sentiment remains upbeat.

Wall Street is trading near record highs. In 3.17pm trading in New York, the Dow Jones Industrial Average inched 0.07 percent lower. The Nasdaq Composite Index rose 0.18 percent. In 3.02pm trading, the Standard & Poor’s 500 Index barely budged, down 0.01 percent.

“We're probably going to consolidate and then head higher," John Canally, chief economic strategist for LPL Financial, told Reuters. "The odds of a US recession are low. The odds of a global recession are low. Central banks are cooperating."

In the Dow, declines in shares of American Express and those of DuPont, recently down 0.9 percent and 0.7 percent respectively, outweighed advances in shares of Pfizer and those of Walt Disney, last up 0.6 percent and 0.5 percent respectively.

Shares of Gap dropped, last trading 6.3 percent weaker, after the company posted sales that fell short of expectations. However, there were positive earnings surprises including from Endo International Microchip Technology and embattled Canada’s Valeant Pharmaceuticals, all pushing the respective stocks higher.

The latest US economic data were mixed. A Commerce Department report showed that wholesale inventories gained 0.3 percent in June, an upward revision. However, a Labour Department report showed US nonfarm productivity posted a surprise decline, falling at a 0.5 percent annual rate in the second quarter.

"The reason the economy has still been able to expand is because of labour input. Firms are hiring people at a reasonably healthy rate," Joseph LaVorgna, chief economist at Deutsche Bank Securities in New York, told Reuters. "However, we do not believe this can last, because strong hiring in the face of weak productivity necessarily implies a further deterioration in corporate profit margins.”

Meanwhile, oil prices fell, giving up some of Monday’s gains, as concern about global supply returned to the forefront of investors’ minds.

“The oil market remains in a battle between the trading community which focuses in the shorter term data and information which has been mostly bearish, versus the investment trading crowd which is focused on the medium-to-longer term which is projected to be bullish,” Dominick Chirichella, senior partner at the Energy Management Institute in New York, told Reuters.

"Both WTI and Brent will have to move above the US$50 per barrel level and remain there for the shorter-term traders to regain confidence that the market is embarking on a new up leg," Chirichella told Reuters.

In Europe, the Stoxx 600 Index finished the day with a 0.9 percent increase from the previous close. The UK’s FTSE 100 index rose 0.6 percent, France’s CAC 40 index gained 1.2 percent, while Germany’s DAX index rallied 2.5 percent, bolstered by shares of Munich Re, BMW and Daimler.

(BusinessDesk)

BusinessDesk.co.nz

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