Stocks flounder after weak GDP, jobs data - Stocks flounder after weak GDP, jobs data -

Thursday, May 31, 2012

Stocks flounder after weak GDP, jobs data -

Stocks flounder after weak GDP, jobs data -

U.S. stocks finished in the red Thursday, ending a wretched month on a weak note.

"May is always a difficult month for the market, and this month has lived up to that reputation," said Fred Dickson, chief market strategist at D.A. Davidson, noting that the market has suffered declines in May for three out of the last four years.

This month's sell-off was sparked by escalating concerns about the eurozone debt crisis, with Spain and Greece keeping contagion worries front and center, as well as fears about a slowing U.S. economy. CNNMoney's Fear & Greed Index, which measures investor sentiment, has remained firmly in "extreme fear" territory for more than two weeks.

The Dow and S&P 500 dropped more than 6% in May. In fact, the Dow only booked five positive days this month. The last time this occurred was in January 1968. Meanwhile, the Nasdaq has declined more 7%.

The Dow and Nasdaq logged the worst monthly performance since May 2010, when investors were spooked by the Flash Crash, while the S&P 500 posted its biggest monthly loss since September 2011.

As stocks have tumbled, investors have rushed toward the safety of U.S. Treasuries, pushing the 10-year yield to record lows.

Thursday's market moves were driven by a batch of weak U.S. economic data, including reports on initial jobless claims and regional manufacturing, which cast a cloud over hopes that the domestic economy is improving.

Meanwhile, gross domestic product growth for the first quarter was revised lower to a 1.9% annual rate.

The Dow Jones industrial average finished down 26 points, or 0.2%. The S&P 500 lost 3 points, or 0.2%, and the Nasdaq shed 10 points, or 0.4%.

"The market environment is very fragile, and investor nerves are very fragile," said Dickson. "We're seeing immediate reactions to pieces of economic data and incremental news regarding Europe's banks and broader fiscal problems. Lacking a positive fundamental background, buyers are stepping back even though market valuations look compelling."

Investors also continue to keep tabs on Europe's debt crisis.

Worries about Spain not being able to fund bank bailouts, which could reach a cost of as much as €100 billion, continue to build. The yield on 10-year Spanish debt soared to 6.6% Wednesday, but retreated slightly Thursday.

The International Monetary Fund said it will begin its annual economic review of Spain next Monday.

Investors are also keeping a close eye on Greece, ahead of the country's elections next month, amid concerns that Greek voters could reject austerity measures, which would force their country out of the eurozone.

U.S. stocks also fell sharply Wednesday on heightened concerns about Europe's debt crisis.

Economy: A report on private-sector hiring from payroll services firm ADP showed a gain of 133,000 jobs, less than the 157,000 forecast by economists.

Additionally, the number of people filing for first-time unemployment benefits in the U.S. rose 10,000 to 383,000 in the latest week, which was higher than the expected 368,000 forecast by analysts.

The latest batch of jobs reports came before the government's closely watched monthly jobs report, which is due Friday. Analysts surveyed by CNNMoney expect that the U.S. economy added 150,000 jobs in May, including 12,000 government cuts. The unemployment rate is expected to stay at 8.1%.

The Chicago Purchasing Managers Index, which tracks manufacturing activity in much of the Midwest, fell for a third straight month to 52.7, the lowest level since May 2009. The index was expected to come in at 57 for May, up from 56.2 in the month prior. The report is seen as an indicator of what will happen with the national reading on manufacturing from the Institute of Supply Management, due Friday.

Foreclosures accounted for for 26% of home sales during the first three months of the year, according to a report released Thursday by RealtyTrac.

Companies: Shares of Joy Global fell after the mining equipment maker easily beat forecasts but lowered its guidance.

Networking equipment maker Ciena reported earnings that blew past analysts' estimates and issued a forecast in line with expectations, lifting shares.

Shares of TiVo fell after the DVR maker reported a larger-than-expected quarterly loss after the bell Wednesday.

Shares of Facebook hit a fresh low of $26.83 but managed to recover, ending the day up 5% at $29.60.

World Markets: European stocks ended mixed. Britain's FTSE 100 rose 0.2%, the DAX in Germany rose 0.3% and France's CAC 40 dropped 0.1%.

Firms suffer from 'ad hoc' financial reporting system investments - PC Advisor

Inefficient financial reporting is leading to a loss of confidence, high costs and hindered decision-making at large firms, according to research from business consultancy Accenture.

The research shows the majority of companies worldwide have made "substantial" investments in financial reporting systems intended to improve their reporting and filing processes. However, the investments have been made ad hoc, "leaving businesses with ineffective solutions and a lack of visibility, quality and confidence in their financial data", said Accenture.

The "Challenges of Corporate Financial Reporting" report highlights that businesses are unable to fully understand the cost of their financial reporting, with 60 percent of finance professionals unable to identify the total cost.

The report suggests that businesses need to change their investment strategies in order to avoid increased costs, ineffective financial reporting and missed key internal and external deadlines.

The report, jointly published by Oracle, surveyed 1,123 finance professionals at large organisations (employing over 250) in 12 countries, including the UK, USA, France, Germany, Russia and Spain.

The research shows 82 percent of companies have made changes over the last three years to their filing and reporting processes. But despite these investments inefficient spreadsheets (72 percent) and emails (68 percent) are still being used to track and manage reporting on a daily basis, suggesting that new investments are falling short of expectations.

Despite a fifth (21 percent) of finance teams seeing their costs rise across the financial close, reporting and filing processes, 60 percent of respondents admitted they did not know the total cost of managing and publicising financial results.

In addition, 68 percent of respondents admitted they have inadequate visibility of reporting processes, while 84 percent said "they find it difficult" to control the quality of financial data across the course of their reporting.

Not surprisingly, almost three-quarters (71 percent) felt their effectiveness was "limited in some way" by data analysis-related issues.

However, businesses are continuing to take steps to improve financial reporting methods, with 86 percent of companies "likely to make a significant investment" over the next five years.

Scott Brennan, executive director of the Accenture finance and enterprise performance consulting group, said: "These results mirror what we see and experience, and they're illustrative of why companies increasingly find it necessary in today's age of volatility to invest in their performance management."

In other recent Accenture research it was shown that the majority of UK citizens access government services digitally, but that a third are concerned about their personal data as a result.

US STOCKS-Wall St drops on economic growth worries - Reuters UK

Thu May 31, 2012 3:20pm BST

* Initial claims rise, ADP below expectations

* GDP revised downward

* Chicago PMI misses estimate

* Indexes off: Dow 0.5 pct, S&P off 0.8 pct, Nasdaq 1.1 pct (Adds Chicago data)

By Chuck Mikolajczak

NEW YORK, May 31 (Reuters) - Wall Street fell on Thursday after a slew of economic reports indicating the U.S. economy may have stalled and the euro zone's debt crisis cast doubt on global growth prospects.

A report by private payrolls processor ADP showed private employers created 133,000 jobs in May, fewer than the expected 148,000 while new claims for unemployment benefits rose by 10,000 for the fourth straight weekly increase. The data comes ahead of Friday's key payrolls report.

Commerce Department data showed economic growth in the United States was slightly slower than initially thought as gross domestic product was revised down to a 1.9 percent annual rate from last month's 2.2 percent estimate.

Adding to the negative tone, the Institute for Supply Management-Chicago business barometer declined to 52.7 from 56.2 in April, its lowest level since September 2009 and below Wall Street expectations.

"The markets have become less optimistic and much more accustomed to seeing numbers that are just not impressive," said Peter Kenny, managing director at Knight Capital in Jersey City, New Jersey.

"It is clear the markets are pricing in a substantial slowdown moving forward in terms of GDP growth, employment gains, productivity gains - it's not encouraging for bulls."

Energy-related stocks were among the worst performers as crude prices slipped 0.8 percent as signs of a slowing slowing global economy heightened demand worries. The PHLX oil service sector index lost 1.9 percent, weighed down by a 2.9 percent drop in Schlumberger NV to $62.27.

European shares, which had steadied, turned negative after the U.S data. The FTSEurofirst 300 was off 0.5 percent.

The European Central Bank increased pressure for a joint fund to guarantee bank deposits in the euro zone, saying the region needed new tools to fight bank runs as the bloc's debt crisis drives investors to flee risk.

The increasing concern over the euro zone's debt crisis coupled with a spate of tepid domestic economic data has put the benchmark S&P index on pace for its worst monthly decline since September.

U.S. equities have been closely linked to the fortunes of the euro, with the 50-day correlation between the currency and the S&P 500 at 0.92. Expectations of an Irish vote in favor of Europe's fiscal pact helped the euro recover from a near two-year low against the dollar.

The Dow Jones industrial average dropped 65.39 points, or 0.53 percent, to 12,354.47. The Standard & Poor's 500 Index lost 11.00 points, or 0.84 percent, to 1,302.32. The Nasdaq Composite Index fell 31.92 points, or 1.12 percent, to 2,805.44.

Many top retailers reported stronger-than-expected sales in May, as shoppers overcame growing anxiety about the U.S. economy and the job market.

Target Corp advanced 0.9 percent after posting better-than-expected May same-store sales. The Morgan Stanley retail index gained 0.3 percent.

Ciena Corp climbed 7.2 percent to $12.74 after the network equipment company posted a surprise second-quarter adjusted profit.

Joy Global Inc slid 7.2 percent to $54.66 after the mining equipment maker said it expects order rate to moderate and revenue to remain flat for the next few quarters. (Editing by Dave Zimmerman)

CANADA STOCKS-TSX slumps on soft U.S. data, Europe - Reuters India

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Materials Stocks Have Taken a Beating, But I’m Still Bullish -

It’s been night and day for materials stocks in 2012. Many stocks in this sector popped early in the year, but have dropped hard recently to right where they were back in December.

So what’s going on? Simply put, many investors are worried the recovery is running out of gas — or worse, that it never was a recovery at all.

As America struggles, regions of Europe slip into recession and China starts to slow down, many are afraid materials companies will see already meager demand dry up and send these companies even lower.

That’s nonsense.

Consider this: Alcoa (NYSE:AA) hasn’t traded under $8.40 since May 2009. And ArcelorMittal (NYSE:MT) hasn’t traded this low since 2004!

Do we really think these companies are worse off now than back then? Do we really want to ignore that when Alcoa was last priced this low in 2009, as demand was weak and the company was restructuring, it delivered a 35% gain across the next 12 months?

I just don’t get it. Yes, there are many risks to the global economy out there. Yes, we’ve known about weak aluminum and steel demand for years. Yes, we’ve been on the eurozone death watch for months. The story of China’s slowdown, the softness in housing … I get it.

But what’s new here?

Rather than focus on old headlines, I’m interested in the momentum that Alcoa and ArcelorMittal are gaining compared with their crisis-level lows. And you should be too, now that shares are priced at the same levels or lower.

Consider that Alcoa slashed its global work force by 13% in 2009, laying off a massive 13,500 workers. ArcelorMittal also laid off thousands of workers in 2009, cutting output to just 70% of capacity back then and regularly idling facilities to bleed down oversupply ever since.

The restructuring has made both companies soundly profitable once more. And believe it or not, they actually are seeing glimmers of growth.

Alcoa has seen nine straight quarters of year-over-year revenue increases. ArcelorMittal has seen seven in a row. Admittedly, both stocks are forecast to see slight earnings declines in 2012 compared with 2011 if forecasts hold — but those numbers are light-years ahead of 2009. Also, both AA and MT are right around 52-week lows, so it’s hardly like you’re buying a top before a flop.

More good stuff for ArcelorMittal: The steel giant has a forward P/E of less than 5 right now — and a 4.5% dividend to boot!

And for Alcoa: Aluminum buyers in Japan, Asia’s largest importer, just agreed to pay a record premium to aluminum producers next quarter as the nation continues to ramp up its industries and rebuilds in the wake of the disastrous earthquake and tsunami last year. This reinforces my belief that between baseline demand and minimal output, base metal prices like aluminum and steel have nowhere to go but up.

There are risks in these stocks, to be sure. Lingering conflicts between management and union efforts at ArcelorMittal threaten disruptions to the business or increased labor costs. And Alcoa posted its first quarterly loss since 2009 in its fiscal fourth quarter as metal prices tumbled.

There also are some bigger-picture risks to acknowledge for these stocks and the sector in general:

  • Materials stocks are volatile, so even if we see a rally in these stocks across the next few months, it might not last long — as we saw with the jump in the first eight weeks of the year that evaporated just as quickly.
  • Inflation and the dollar can have a big factor on metal prices and the profitability of these companies. Many people (justifiably) think that the dollar’s current strength is simply due to the disaster in Europe rather than the merit of the U.S. itself, and it will only take a few more stupid debt ceiling headlines to change that in a hurry.
  • As many will point out, some of the previous rallies in equities were based on Fed action or sentiment rallies, so investing based on logical assumptions or fundamental trends might never amount to anything.
  • Then there are the Armageddon scenarios where a eurozone meltdown obliterates the global economy — but if you believe that’s the case, frankly, you should be building a bunker instead of reading this article.

However, even with those factors in play, I think the bottom line is that materials stocks like Alcoa and ArcelorMittal are the ultimate cyclical stocks. When the economy ramps up, construction rebounds and durable goods are in demand, these companies will take off.

I, for one, think that a year or two from now we will be in a true self-sustaining recovery — and that means AA and MT are bargains.

Maybe you think it’s a Pollyanna outlook to expect that a recovery is coming at all in the next few years, or maybe you think it’s na├»ve to say Alcoa and Arcellor Mittal have “right-sized” themselves enough to weather any short-term difficulties in the next six months. If so, I would love to hear from you and have you make your case. Please share your thoughts below in the comment section or drop me a line at

But to me, I think it’s a relatively low-risk investment to tread water in AA or MT and wait for sunnier times to lift shares. That’s why I personally own Alcoa stock and think AA is your best stock to hold for the rest of 2012.

Jeff Reeves is the editor of and the author of “The Frugal Investor’s Guide to Finding Great Stocks.” Write him at editor@investorplace​​.com or follow him on Twitter via @JeffReevesIP. As of this writing, Jeff Reeves owned a position in AA.

US stocks waver; euro dives on Greece turmoil - Yahoo Finance

Stronger news about the U.S. economy stilled the ripples from Europe's latest political impasse Tuesday, pushing U.S. stocks between modest gains and losses.

The euro and European stocks plunged as trading in New York began after efforts to form a government in Greece collapsed. Newly-elected political leaders there disagree about whether to accept more international bailouts and continue with painful spending cuts.

In the U.S., stocks staged a mid-morning rally after word that confidence among U.S. builders rose to a five-year high in May. The index has risen for seven of the past eight months. Homebuilders rallied. Hovnanian Enterprises surged 10 percent, Lennar Corp. 4 percent and KB Home 3 percent.

Earlier, a survey by the New York Federal Reserve found that manufacturing activity in the New York region rebounded this month far more strongly than economists had expected.

The market's early rise deflated briefly, then stocks climbed at midday to new daily highs. By the afternoon, the indexes again were flat for the day.

The Dow Jones industrial average fell 12 points to 12,683 as of 3 p.m. EDT. Losses by most of its components were offset by gains for JPMorgan Chase and Bank of America, shaking off recent losses related to the surprise $2 billion trading loss that JPMorgan announced last week.

The Standard & Poor's 500 index fell two to 1,336. The Nasdaq composite index rose seven to 2,909.

Stocks are having their worst month in the past eight. For the month, the Dow is down 518 points — about 4 percent — after hitting a four-year high on May 1. The average is on track to post its first monthly loss since September, when it fell 6 percent.

If the Dow closes higher, it will be only its second up day since the peak reached on May 1.

The euro fell as low as $1.2730, a four-month low against the dollar, after Greek socialist leader Evangelos Venizelos declared that attempts to form a governing coalition there had failed and new elections will be held next month. If voters elect parties opposed to the terms of the country's financial rescue, Greece could be expelled from the euro, shocking global markets.

Stock indexes in France, Britain and Germany gave up earlier gains after Venizelos' remarks and closed sharply lower.

Aside from fears about Europe, stocks are suffering because a string of weaker economic data in recent weeks has dampened hopes for corporate performance in the current quarter ending June 30, said John Butters, senior earnings analyst at FactSet, a financial data provider.

For the first month of the quarter, as earnings came in strong and stocks rose, analysts' expectations for second-quarter earnings growth held steady at 6 percent, Butters said. In the two weeks since then, as the U.S. economy appeared to soften and Europe's problems reemerged, analysts cut their estimates for S&P 500 earnings growth to 5 percent, he said.

Analysts expect earnings to decline this quarter for half of the 10 industry groups in the S&P 500, Butters said. He said many expect a strong rebound in the fourth quarter as demand returns in emerging markets such as China and India.

Among other stocks making big moves:

— Home Depot slumped 2 percent, the most of the 30 companies in the Dow, after the world's biggest home-improvement company forecast revenue that was below what Wall Street analysts were expecting.

— TJX Cos., which owns the T.J. Maxx, Marshalls and HomeGoods store chains, shot up 7 percent, the most in the S&P 500 index. The discount retailer reported a 58 percent surge in first-quarter income and raised its full-year profit forecast.

— Avon Products Inc. fell 11 percent, the most in the S&P 500 index, after Coty Inc. canceled its unsolicited, $10.7 billion bid for the cosmetics retailer.

— Groupon leapt 6 percent after the online daily discount site reported first-quarter revenue that exceeded analysts' expectations.


Daniel Wagner can be reached at

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