While you were sleeping: US economic red flags

Thursday 4th February 2016

Equities on both sides of the Atlantic moved lower, even as Wall Street pared some its earlier losses as the price of oil bounced, amid persistent concern about the outlook for global economic growth and corporate profits.

In 12.21pm trading in New York, the Dow Jones Industrial Average inched 0.03 percent lower, while the Nasdaq Composite Index dropped 1.1 percent. In 12.06pm trading, the Standard & Poor’s 500 Index fell 0.6 percent.

"I think the next couple of quarters could be really volatile," Bryce Doty, portfolio manager at Sit Investment Associates, told Reuters. "You need the markets to settle into a new equilibrium without this manipulated support from the Fed, which means a correction. The problem with corrections is that markets tend to over correct before they rebound."

In the Dow, slides in shares of Intel and those of Merck, recently down 3.7 percent and 2.7 percent respectively, offset gains in shares of DuPont and those of Exxon Mobil, last trading 2.8 percent and 2.2 percent higher respectively.

US Treasuries also declined, pushing yields on the 10-year note yield three basis points higher to 1.87 percent.

Shares of Yahoo dropped, last 6.2 percent weaker, after its results and saying it’s looking at “strategic alternatives”.

Meanwhile, General Motors posted a fourth-quarter profit that surpassed expectations, and it reported record net income for the full year. Still, its results weren’t enough for its stock to escape the broader direction of the market. Shares of General Motors dropped 3.3 percent.

“The fourth quarter closed another very strong year of operating performance,” Chuck Stevens, General Motors’ CFO, said in a statement. “We plan to improve our results in 2016, driven by a significant vehicle launch cadence, continued emphasis on growing our adjacent businesses and an unrelenting focus on driving efficiencies into our core operations.”

US jobs data remained strong. A report by ADP showed private employment rose 205,000 in January, beating economists' expectations, and following an upwardly revised 267,000 in December.

On Friday a Labor Department report is expected to show US employers hired 190,000 workers last month, while the jobless rate held at 5 percent, according to a Bloomberg survey of economists.

Still, other reports were disappointing and raised concern about the strength of the economy.

The Institute for Supply Management's index of non-manufacturing activity weakened to 53.5 in January, the lowest level nearly two years and down from 55.8 in December.

Separately, Markit's services business activity index slid to 53.2 last month, the lowest level since October 2013 and down from 54.3 in December.

"Going back a half year or so, it had seemed that the weakness in the economy was fairly isolated in the manufacturing sector as well as a few other areas, mainly energy and exports," Daniel Silver, an economist at JPMorgan in New York, told Reuters. "But we now have these surveys showing that the service sector has weakened as well over the past few months."

In Europe, the Stoxx 600 Index ended the day with a 1.5 percent drop from the previous close. France’s CAC 40 Index declined 1.3 percent the UK’s FTSE 100 Index retreated 1.4 percent, while Germany’s DAX Index fell 1.5 percent.

BusinessDesk.co.nz

Comments from our readers

No comments yet