For several hours, the stock market was giving off signs that it might slump badly. But the market has reversed, and early losses have been recovered or trimmed substantially.
The odds are the market has turned because short-sellers, who had bet the market would move lower, are buying back shares to lock in their profits.
The rebound came after the market had opened higher and promptly slumped after two reports reinforced the evidence the economy is slowing down. The Dow Jones industrials ($INDU) had been down as many as 83 points before rebounding.
Utility stocks were mostly higher. Sodastream International (SODA) shares were up $1.76 to $32. Amazon.com (AMZN) and Google (GOOG) were leading technology higher. Chesapeake Energy (CHK) shares were up 98 cents to $16.56 after the company said it will replace four directors, a nod to activist shareholder Carl Icahn, who owns a 7.6% stake in the company.
At 3:16 p.m. ET, the Dow was down 37 points to 12,081 after briefly moving into the black. The Standard & Poor's 500 Index ($INX) was off 3 points to 1,275. The Nasdaq Composite Index ($COMPX) was up slightly to 2,748. The Nasdaq-100 Index ($NDX) was up 4 points to 2,463. The index is heavily influenced by Apple (AAPL), which was off $1.71 to $559.28. The shares had been down as much as $12.
Article continues below.
"It is difficult to argue for owning the stock today," wrote Bernstein analyst Carlos Kirjner in a research report today.
A near-term slowdown in sales growth will fuel investor concerns about full-year 2013 sales, Kirjner wrote. The deceleration may "prove to be a temporary setback if, over time, Facebook manages to improve monetization of its inventory, both PC- and mobile-based, and maximize the value of social advertising," Kirjner wrote.
Facebook is developing tools to let children younger than 13 use the site with parental supervision, a move that may rekindle privacy concerns, The Wall Street Journal reported Sunday.
Another potential issue for Facebook: Google is expected to launch a new small-business marketing product that leverages Google+, Offers, Wallet and other products.
Google was up $7.14 to $578.12.
The jobs report still weighs on the market
But the rally was snuffed out by the realization that considering a plan doesn't mean it's going to happen any time soon. Then, the U.S. government said April factory orders were weaker than expected, and a report from the Institute for Supply Management's New York Chapter showed activity pulling back.
Despite the gains, the market is vulnerable at best and still reeling from the May jobs report, which showed only 69,000 jobs added to the economy. Industrial and financial stocks are the weakest sectors.
JPMorgan Chase (JPM), Caterpillar (CAT) and General Electric (JPM) are the laggards among the 30 stocks. Home Depot (HD) is the leader.
JPMorgan was down $1.03 to $30.90 because of European concerns and because of a report in The New York Times that a group of investors warned the banking giant a year ago that its risk controls were weak.
The Dow is down for the fourth day in a row. It's off 0.5% for the year. The S&P 500 is now fully in a correction, popular defined as a 10% decline from a recent peak. In this case, the index is off 10.6% from its April 2 closing high.
The Nasdaq is down 12.6% from its peak on March 26.
Things are worse elsewhere. Germany's Xetra Dax Index ($DE:DAX) is off 16.5% since peaking in March. France's CAC-40 Index ($FR:PX1) is down 17.8%. Britain's FTSE-100 Index ($GB:UKX) is down 11.8%. Japan's Nikkei-225 Index ($JP:N225) has fallen 19.1%.
Gold settles lower; crude oil rebounds
Crude oil (-CL) reversed course and was up 62 cents to $83.85 a barrel in New York. It had fallen to as low as $81.21. Brent crude also was rallying, hitting $98.68 a barrel, up 25 cents after dropping to $95.63 in overnight trading.
The retail price of regular unleaded gasoline was averaging $3.585 a gallon, according to AAA's Daily Fuel Gauge Report. That's still up 9.4% for the year but down 8.9% from its peak in early April.
Gold (-GC) settled down $8.20 to $1,613.90 an ounce. Silver (-SI) dropped 50.5 cents to $28.007 an ounce. Copper (-HG) slipped to $3.307 a pound.
The 10-year Treasury yield was up slightly to 1.524% from Friday's at 1.467%.
Proposition 29 is facing long odds to overcome Big Tobacco's vast money advantage. - Inside Bay Area
SACRAMENTO -- It was midsummer 2006, and a Field Poll showed Californians favored an initiative for a stiff new tobacco tax by a 2-1 ratio.
Three months later, after tobacco companies poured in $66 million to fund a blistering TV ad campaign -- the last ad featuring a doctor in a white smock excoriating the initiative -- the proposition went down in flames.
Sound familiar?
After riding solid polls out of the gate in March, leading in one survey by 37 points, Proposition 29, the ballot measure that would raise taxes on cigarettes by $1 a pack to fund cancer research, looked like a sure thing. But that was before opponents -- using $46 million from tobacco giants Philip Morris and R.J. Reynolds -- began waging an unrelenting TV and radio ad campaign, featuring the same doctor in a white smock.
A survey released Thursday by the Public Policy Institute of California showed Proposition 29's lead down to 11 points: 53 percent to 42 percent.
Though the measure still holds leads in most polls, the downward trajectory bodes ill for proponents heading into Tuesday's election.
Defeat, political analysts say, has been almost a certainty for ordinary citizens -- or merely less endowed campaigns -- who try to carry a ballot initiative past a powerful interest group with seemingly unlimited funds.
"The initiative system has biases in favor of groups that have money -- and of groups trying to stop something rather than pass
something," said Jack Pitney, a political-science professor at Claremont McKenna College. "If you can create doubts, you have a good chance of defeating a measure."Come-from-behind wins in initiative battles are not the sole province of tobacco companies. Oil firms pulled off a major turnaround in 2006, too. Voters initially backed a ballot measure to slap a tax on oil companies to fund alternative-energy programs by a ratio of nearly 3-to-1 in an early-summer Public Policy Institute of California poll. But after the oil industry went to work, outspending proponents $93 million to $62 million, Proposition 87 went down to defeat.
In each instance, a maxim of California ballot measure politics was fulfilled: It's easier to defeat initiatives because cranky voters are inclined to vote no on measures, particularly those asking for money. And when a no campaign can throw bushels of cash into a race to dominate the airwaves with a message that gets practically ingrained in the public's consciousness, the odds are even worse for the yes side.
"They pound the message over and over and after a while, people lose track of the basic purpose of the measure and become troubled by the alleged negatives," said Tracy Westen, founder of the Los Angeles-based Center for Governmental Studies.
In the case of Proposition 29, opponents have steered the focus away from the central theme of the initiative: funding cancer research and potentially saving hundreds of thousands of lives by lowering the rate of smoking through higher tobacco taxes.
The yes side, which has received $10 million in campaign contributions from health organizations, has even had a tough time casting the campaign as being about tobacco companies trying to protect their profits. That's a potentially winning message in California that has gone largely unheeded -- because proponents simply haven't been on the air enough to crash through the barrier of public awareness.
"A good message isn't going to persuade people if they never hear it," Pitney said.
Instead, voters have been exposed mostly to the no side's notion -- which has been debunked by the measure's proponents -- of a vast, newly created government bureaucracy that allows unelected officials to spend taxpayer money out of state. Political analysts say the ad campaign is filled with buzz phrases meant to appeal to Californians' general distrust of government.
Once in a while, however, all the money in the world won't work.
The one advantage Proposition 29 proponents cling to is that "voters believe tobacco is bad, and they want fewer people to smoke," said Melissa Michelson, a political-science professor at Menlo College in Atherton.
"The advertising has definitely been very one-sided, but I don't know if that means the yes side has no shot. This is the sort of issue where people are not as likely to be influenced by the advertising of the no side because they'll have an underlying view on whether tobacco should be taxed more."
Indeed, there have been recent examples of voters rising up against powerful industries in ballot fights. In 2010, voters defeated initiatives backed by PG&E and Mercury Insurance, which outspent their opponents by spectacular margins.
Opponents of PG&E's Proposition 16 -- which would have made it harder for cities to go into the utility business -- had only $133,000 at their disposal against PG&E's $43 million, but prevailed. Opponents defeated Mercury's Proposition 17 -- which consumer groups said would have raised auto-insurance rates -- despite being outspent $13 million to $1.7 million.
But those underdogs had the power of the no vote on their side.
Contact Steven Harmon at 916-441-2101. Follow him at Twitter.com/ssharmon. Read the Political Blotter at IBAbuzz.com/politics.
A handful of California ballot initiative races in the past decade have proved that heavily financed opposition campaigns can overcome early deficits in the polls.
Proposition
defeated What measure would have done Election Pro money Con money
27 Eliminate Citizen Redistricting Commission 2010 general $5.4 million $24.5 million
7 Require utilities to get more power from renewables 2008 general $9.3 million $29.8 million
75 Prevent unions from using dues for politics 2005 special $8.9 million $47.5 million
86 Increase cigarette taxes by $2.60 a pack 2006 general $16.5 million $66.4 million
87 Establish program to reduce oil consumption 2006 general $61.5 million $93 million
Source: Eric McGhee, fellow at Public Policy Institute of California
Big money trumps
early leads
A handful of California ballot initiative races in the past decade have proved that heavily financed opposition campaigns can overcome early deficits in the polls.
2010: Proposition 27
(to eliminate Citizen Redistricting Commission)
Pro money: $5.4 million
Con money: $24.5 million
2008: Proposition 7
(to require utilities to get more power from renewables)
Pro money: $9.3 million
Con money: $29.8 million
2005: Proposition 75
(to prevent unions from using dues for politics)
Pro money: $8.9 million
Con money: $47.5 million
2006: Proposition 86
(to increase cigarette taxes by $2.60 a pack)
Pro money: $16.5 million
Con money: $66.4 million
2006: Proposition 87
(to establish program to reduce oil consumption)
Pro money: $61.5 million
Con money: $93 million
Source: Eric McGhee, fellow at Public Policy Institute of California
CANADA STOCKS-Toronto stocks stumble on slowdown concerns - Reuters UK
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U.S. stocks extend drop on ‘soft patch’ fears - Marketwatch
By Laura Mandaro, MarketWatch
SAN FRANCISCO (MarketWatch) — U.S. stocks extended losses into a fourth day Monday after a report on U.S. factory orders showed a surprise drop, adding to souring sentiment about domestic growth and as investors waited for more market-moving events later in the week.
After Friday’s surprise shortfall in U.S. payrolls growth, “even more second-tier reports take on a higher significance,” said Bill Stone, chief investment strategist at PNC Asset Management Group, of the factory-orders report. “I think we admit we’re in a soft patch. Now it’s a question of how soft a soft patch.“
Investors brace for slowdown
As global economic worries deepen, policy makers around the world are feeling pressure to gird against the fallout of Europe's debt crisis. Jonathan Cheng reports on Markets Hub. Photo: AP.
The Dow Jones Industrial Average /quotes/zigman/627449 DJIA -0.42% reversed lower shortly after the open and was recently down 65 points, or 0.5%, to 12,053.
It had been down about 25 points before the 10 a.m. Eastern factory data as early enthusiasm ebbed for reports that European leaders were moving closer to a bailout of Spain’s banking system.
The S&P 500 index /quotes/zigman/3870025 SPX -0.35% was off 10 points, 0.8%, to 1,276.57. On Friday, the index of large-cap stocks fell under its 200-moving average and also dropped 10% from a 52-week intraday high, or what some technical analysts consider correction territory. Read more on the moving average.
The Nasdaq Composite index /quotes/zigman/123127 COMP -0.05% fell 16 points, or 0.6%, to 2,731.
Orders for goods produced in U.S. factories decreased 0.6% in April, the Commerce Department said Monday. Economists polled by MarketWatch had expected a rise of 0.1%. Read more on factory orders.
“New orders and shipments of capital goods were lower in another sign that the U.S. economy continues to fall either on its own or as part of a bigger global slowdown,” said Andrew Wilkinson, chief economic strategist at Miller Tabak & Co.
“Market-wise, investors have become accustomed to data disappointments and with many coming around to the conclusion that policy response from the Fed is inevitable,” he wrote in an email.
The Dow slumped 274.88 points, or 2.2%, on Friday to its lowest closing level since Dec. 21, after data showed that the U.S. economy created much fewer jobs than expected in May. Read more on Friday's selloff.
Global doom hits Asian markets
Asian markets slumped with the Hong Kong's Hang Seng Index erasing any gains made this year. As the WSJ's Jake Lee tells Deborah Kan, investors are not finding many bright spots in the global economy. Photo: Getty Images
On Sunday, a report showed China’s services sector expanded at its slowest pace in more than a year, adding to worries about the nation’s economy. Two separate surveys last week showed deteriorating conditions in China’s manufacturing sector. Read more on China services sector.
Supporting early gains Monday, media reports signaled European officials were coalescing around specific strategies to contain the euro debt crisis.
The Wall Street Journal reported that Germany has signaled it may be willing to embrace ideas it has so far opposed — such as common euro-zone bonds and mutual support for European banks, if other European nations in turn give up more sovereignty to European Union institutions.
Separately, Germany’s Der Spiegel magazine reported that Berlin is pressing Spain to accept aid from the European Financial Stability Facility that would be used to inject liquidity in its banking sector, but Spain has resisted the calls.
Then on Monday, a spokeswoman for Canadian Finance Minister Jim Flaherty said the G-7 finance ministers and central bank governors will hold a conference call Tuesday on the European debt crisis.
European headlines continue to exert the most influence over stock direction, noted PNC’s Stone, but trading is constrained while investors await more substantive announcements.
Among U.S. data releases, the Institute for Supply Management’s report on the U.S. services sector Tuesday is considered one of the key U.S. data releases for the week. The European Central Bank’s monetary-policy meeting on Wednesday will also be closely watched, followed by testimony by Federal Reserve Chairman Ben Bernanke on Thursday. Read more on what’s expected this week.
European headlines over the last few days “did not have a lot of meat. We’ll probably get meat Wednesday with the ECB,” said Stone.
Altogether, it’s a “wait and see Monday,” he said.
HK stocks fall 2 pct to 2012 low, erase year's gains - Reuters UK
HONG KONG, June 4 |
HONG KONG, June 4 (Reuters) - Hong Kong shares fell to their lowest point for the year, tumbling 2 percent on Monday as weak U.S. data added to worries about Europe's deepening debt crisis and China's slowing economy, driving investors out of riskier assets.
The Hang Seng Index closed 2 percent lower at 18,185.59. The China Enterprises Index of top locally listed mainland firms fell 2.6 percent.
On the mainland, the Shanghai Composite fell 2.7 percent with losses accelerating in the afternoon session. The large-cap focused CSI300 finished down 2.8 percent.
HIGHLIGHTS
* The worst hit sectors in Hong Kong remained cyclicals such as materials, mining and energy that are closely linked to economic growth. Sub-indices for the materials and energy sectors fell 3 and 2.5 percent, respectively. Maanshan Iron & Steel fell 7 percent extending its May rout. Oil major CNOOC dropped 2.9 p ercent while China's largest coal producer China Shenhua fell 4.2 percent.
* The biggest drag on the Hang Seng, however, was HSBC Holdings, which fell 1.2 percent to a 4-1/2-month low. Shares of Europe's largest bank, which commands a 15 percent weighting on the Hong Kong benchmark, have slumped more than 16 percent from a Feb. 21 high as the euro zone debt crisis worsened.
* Sands China which had its first trading day as a part of the Hang Seng Index, fell 4.8 percent after Deutsche Bank cut its target prices of Macau gaming stocks by 6 to 13 percent, partly on slowing growth in the gambling enclave. Growth in gambling revenue from Macau slowed to a three-year low, data showed last Friday. Sands China is still Deutsche Bank's top pick in the sector, which remains a "buy" from the brokerage.
(Reporting by Vikram Subhedar; Editing by Jacqueline Wong)
US Stocks Lower After Weak Factory Data - 4-traders (press release)
-- Stocks extend declines after April factory orders show surprise decline
-- Orders for manufactured goods fall unexpectedly in April
--S&P 500 on pace to close in correction territory, or 10% lower than its recent high
NEW YORK--U.S. stocks continued to spiral lower Monday after an unexpected decline in factory orders fueled mounting concerns about slowing economic growth.
The Dow Jones Industrial Average was off 50 points, or 0.4%, to 12068 in recent trading. The Standard & Poor's 500-stock index was down seven points, or 0.5%, to 1271, and the Nasdaq Composite declined 11 points, or 0.4%, to 2736.
Major stock benchmarks suffered their steepest losses of the year on Friday, following a monthly jobs report that missed expectations.
Monday's drop sent the S&P 500 into correction territory, or a 10% fall from recent peaks. The Nasdaq went into correction last week, while the Dow has fallen 9.2% from its May 1 close.
Declines accelerated after the Commerce Department reported that orders for manufactured goods fell in April, versus forecasts for orders to hold steady.
"Markets had to come to grips with the prospect of slower growth," said John De Clue, regional investment director for U.S. Bank Wealth Management in Minneapolis. "Clearly the issues in the euro zone are serious. You've seen a lot of money move to run and hide in U.S. Treasurys, so the question is: When do people step up and have the confidence to invest [in stocks]?"
Industrial, materials and financial stocks fell the most among the S&P 500's 10 sectors. Caterpillar, a stock closely tied to global growth prospects, recently fell 3.1%. J.P. Morgan Chase also slumped 3%.
Losses in the U.S. followed those in most of Europe and Asia.
The Stoxx Europe 600 fell 0.5% in choppy trading, while Germany's DAX slipped 1.2%.
Spain's IBEX 35 bucked the trend, rallying 2.9% after data showed that May unemployment in Spain fell 0.6% from April.
China's Shanghai Composite slumped 2.7% and Japan's Nikkei Stock Average shed 1.7%.
Weak U.S. manufacturing data came as investors studied a number of headlines from Europe, where a possible euro-zone exit for Greece and Spanish bank instability have roiled global markets in recent weeks.
Brightening the mood were reports that Germany is more willing to discuss deepening the fiscal integration between euro-zone members to resolve the Continent's debt crisis. Germany's leaders have been staunchly opposed to closer ties, though any changes remain a long way off, according to The Wall Street Journal.
In addition, Portugal said it would inject EUR6.65 billion ($8.27 billion) into three of its largest lenders, a move that assuaged some investor concerns about the country's financial system.
Crude-oil futures rose 0.5% to $83.71 a barrel, while gold futures declined 0.4% to $1,616 a troy ounce. The U.S. dollar slipped against the euro but rose versus the yen. The yield on the benchmark 10-year U.S. Treasury note rose to 1.524%.
Elsewhere, shares of Facebook fell 3.6% to below $27 after analysts at Bernstein assigned the stock an "underperform" rating and handed out Wall Street's lowest price target for the company: $25. Separately, The Wall Street Journal reported that the company is developing technology that would allow children younger than 13 years old to use the social-networking site under parental supervision.
Chesapeake Energy rose 5% after the company agreed to replace four members of its nine-member board with candidates proposed by the embattled oil-and-gas company's two largest shareholders, Southeastern Asset Management and activist investor Carl Icahn.
Airline stocks got hit by a wave of selling Monday amid a report from Delta Air Lines that said a closely watched revenue metric missed expectations in May. Delta dropped 10%, United Continental declined 7.4% and US Airways fell 9.8%.
In deal news, Vanguard Natural Resources fell 1% after the company said it had agreed to buy natural-gas and liquid assets, primarily located in Oklahoma, from Antero for $445 million.
Auxilium Pharmaceuticals jumped 12% after the company announced positive test results from a trial of its treatment for Peyronie's disease.
Write to Chris Dieterich at christopher.dieterich@dowjones.com
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