While you were sleeping: Equities drop on data

Thursday 5th May 2016

Wall Street declined as worse-than-expected US economic data and disappointing earnings bolstered concern about the outlook for corporate profits.

An ADP national employment report showed that US companies added 156,000 jobs in April, the smallest increase in three years, followed a revised 194,000 gain in the prior month.

“The job market appears to have stumbled in April,” Mark Zandi, chief economist at Moody’s Analytics in West Chester, Pennsylvania, said in a statement, according to Bloomberg. Moody’s produces the figures with ADP. “One month does not make a trend, but this bears close watching as the financial-market turmoil earlier in the year may have done some damage to business hiring."

Friday’s government report is expected to show that nonfarm payrolls rose by 202,000 jobs in April, while the unemployment rate will hold steady at 5 percent, according to a Reuters survey.

“I don't think the soft data is really going to concern the [Federal Reserve] as long as we see the jobs number in and around 200,000,” Art Hogan, chief market strategist at Wunderlich Securities in New York, told Reuters.

Separately, a Commerce Department report showed the US trade deficit shrank more than expected in March, narrowing 13.9 percent to US$40.4 billion, as imports dropped the most in seven years.

“I think you’re going to see import growth outpace export growth as you go forward, and therefore trade will continue to be a modest headwind to growth in the US,” Jay Bryson, global economist at Wells Fargo Securities, in Charlotte, North Carolina, told Bloomberg.

Wall Street moved lower. In 2.31pm New York trading, the Dow Jones Industrial Average retreated 0.6 percent, while the Nasdaq Composite Index fell 0.7 percent. In 2.16pm trading, the Standard & Poor’s 500 Index shed 0.8 percent.

Declines in shares of Caterpillar and those of General Electric, last 3.1 percent and 2.3 percent weaker respectively, led the Dow lower.

Shares of Priceline sank, trading 8.1 percent lower as of 2.33pm in New York, after the online travel services company offered a second-quarter earnings outlook that fell short of the mark.

Bucking the trend, shares of Time Warner gained, trading 1.5 percent higher as of 2.30pm in New York, after the company reported quarterly earnings that exceeded expectations.

“We expect the market to see some volatility going forward, with a downward bias as investors look for the next positive sign,” Chad Morganlander, a Florham Park, New Jersey-based money manager at Stifel, Nicolaus & Co, told Bloomberg.

In Europe, the Stoxx 600 Index finished the day with a 1.1 percent decline from the previous close. Germany’s DAX index eased 1 percent, France’s CAC 40 index fell 1.1 percent, while the UK’s FTSE 100 index dropped 1.2 percent.

BusinessDesk.co.nz

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