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While you were sleeping: Pfizer weighs on Wall St

Wednesday 2nd May 2018

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Wall Street was mixed as a slide in Pfizer shares weighed on the Dow, while Federal Reserve policy makers began their two-day meeting. 

The Federal Open Market Committee is not expected to announce an interest rate hike at the end of its meeting on Wednesday though investors are hungry for clues whether signs of rising inflation will prompt a steeper path of rate increases.

“There is a tug-of-war in the market as to whether or not the economy is gaining strength, or whether or not it continues to be moderate, and therefore whether or not the economy can withstand three or even four rate hikes, especially if you are seeing a moderation of economic activity in Europe,” Quincy Krosby, chief market strategist at Prudential Financial, told Bloomberg. 

A report by the Institute for Supply Management showed its index of national factory activity fell more than expected to a reading of 57.3 in April, from 59.3 in March. 

"The decline was mainly driven by the production index, which fell quite sharply," Andrew Hunter, US economist for Capital Economics, said in a note. "Overall, the decline in the ISM manufacturing index simply brings it back to a more sustainable level after a period of unusual strength." 

Separately, a Commerce Department report showed construction spending unexpectedly dropped in March, falling 1.7 percent. Spending on residential construction slumped 3.5 percent.

"Unfortunately, the March construction spending figures were less upbeat," according to Hunter. "That suggests that residential investment, which was initially estimated to have flat-lined in the first-quarter, was even weaker than previously believed." 

In 2.47pm trading in New York, the Dow Jones Industrial Average slid 0.4 percent. However, the Nasdaq Composite Index gained 0.6 percent. In 2.32pm trading, the Standard & Poor’s 500 Index declined 0.1 percent.

“I think a lot of data is pointing to 2018 being a peak from many points of view,” Mona Mahajan, US investment strategist at Allianz Global Investors in New York, told Reuters. 

“What’s concerning is beyond this year, the momentum will slow,” Mahajan noted. “We’re starting to see and what the market is starting to realise is a combination of perhaps the peak in momentum from earnings and economic perspective, combined with late-cycle rate-rising environment.”

The Dow fell as declines in shares of Pfizer and those of McDonald’s, recently down 3.9 percent and 2.35 percent respectively, outweighed gains in shares of Intel and those of Apple, recently up 2.7 percent and 1.7 percent respectively. 

Pfizer’s shares dropped as the company reported quarterly sales that fell short of estimates. 

Apple, which is set to report its latest quarterly results after the market close, is expected to announce increases in both its dividend and share buyback.

US Treasuries fell, lifting the yield on the 10-year note one basis point to 2.96 percent.

In Europe, most financial markets were closed for the Labour Day holiday. The UK’s FTSE 100 Index rose 0.2 percent. 


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