Blue Chips Stumble in Choppy Trading
FOX Business: The Power to Prosper
The Dow capped a day of volatile trading modestly lower, and the Nasdaq eked out slight gains, amid a flurry of economic and corporate news.
The Dow Jones Industrial Average was down 41.6 points, or 0.34%, to 12,249, the S&P 500 edged lower by 1.6 points, or 0.12%, to 1,313 and the Nasdaq Composite was up 4.1 points, or 0.15%, to 2,773. The FOX 50 fell 2.5 points to 917.
The frenetic pace of business news led the markets between positive and negative territory much of the day. Among the most widely-eyed news was Moody's announcement regarding U.S. debt.
Moody's said it may put the United States government's AAA debt rating on review for a possible downgrade if the debt limit isn't raised in coming weeks. The ratings company cited a "very small but rising risk of a short-lived default" of U.S. debt in its decision.
Since U.S. debt is considered to be a very low-risk asset by many companies across the world, it is used as the benchmark for a slew of financial instruments. If the rating was actually lowered, the interest rates would likely go up, which could send shockwaves through the global financial system, economists say.
A continuous stream of weak economic data has spurred fear among many market participants that the economic recovery that seemed robust in late-2010 might be losing steam.
The labor market, in particular, has come into focus with the weekly jobless claims report released Thursday, and the highly-watched monthly payroll report slated for release on Friday.
Weaker-than-expected data on private sector payrolls from ADP prompted many economists to sharply reduce their forecasts for Friday's reading of how many jobs the economy added last month. Goldman Sachs, one of the banks to reduce its estimate, blamed "big disappointments" in data released this week for the cut.
Weekly jobless claims fell to 422,000 from a revised 428,000 in the prior week, according to the Labor Department. Wall Street expected claims to fall to 415,000.
Factory orders fell by 1.2% in April on weakening demand for aircraft and soft car sales, according to the Commerce Department -- the biggest drop since May 2010. Analysts had been expecting orders to only tick lower by 0.9% for the month. This comes on the heels of much weaker-than-expected data released by the Institute for Supply Management, showing manufacturing activity expanded at a sluggish pace in May.
So-called temporary factors, including high energy prices and lingering supply-chain affects from the earthquake and tsunami that devastated Japan in March, has muddied the economic data in recent weeks, making it more difficult for economists to gauge the strength of the recovery.
Retailers, Banks and Colleges
Many major retailers reported monthly sales results Thursday. Analysts will be looking to see whether high gasoline prices are beginning to cut into consumers' budgets and reducing demand in the retail sector.
Macy's (NYSE:M) reported sales for stores open at least a year of 7.4% for May, besting estimates of a 5.6% increase. Target (NYST:TGT) revealed a same store sales increase of 2.8%, shy of estimates of 3.5%.
Banking shares were under pressure as Moody's put certain Bank of America (NYSE:BAC), Citigroup (NYSE:C) and Wells Fargo (NYSE:WFC) debt on review for a possible downgrade. The ratings company is assessing whether easing of government support from crisis levels will affect the debt ratings.
Separately, Goldman Sachs (NYSE:GS) received a "broad" subpoena from the Manhattan District Attorney regarding transactions in the mortgage market, a source told FOX Business' Charlie Gasparino. Goldman Chief Executive Lloyd Blankfein is not a subject of the subpoena, the source said.
Companies that own for-profit colleges, like Apollo Group (NASDAQ:APOL) and Corinthian Colleges (NASDAQ:COCO), traded sharply higher after the Department of Education loosened rules that could have reduced federally-provided tuition aid.
Commodities and Currencies
Energy markets were hit by a bearish weekly inventory report, but a weakening dollar helped provide a counterbalance. The U.S. dollar recently fell 0.76% a basket of world currencies and the euro gained 1.2% against the greenback.
Crude stocks were up 2.9 million barrels to 374 million last week, as compared with estimates for a 1.2 million barrel draw. Gasoline inventories were up 2.6 million barrels to 212 million, a much bigger build than the 300,000 analysts were expecting.
Light, sweet crude was up 11 cents, or 0.11%, to $100.40 a barrel. Wholesale RBOB gasoline was off 1 cent, or 0.32%, to $2.97 a gallon.
A gallon of gas at the pump cost $3.78 on average nationwide, down from $3.97 last month, but still well above the $2.72 drivers paid last year.
In metals, gold fell $10.50, or 0.68%, to $1,533 a troy ounce. Silver plunged $1.49, or 4%, to $36.20 a troy ounce.
The specter of a restructuring, or worse, default, of Greek debt has been a major concern in recent weeks. Greece has been struggling to pay off close to half a trillion dollars in public debt.
European Union and International Monetary Fund officials reached a deal with Greece Thursday to provide a fresh bailout package in exchange for stricter austerity measures and a quicker rate of privatization of government entities according to a report by Reuters. If true, this could allay short-term fears that a credit event might occur for Greek debt.
Elsewhere in Corporate News
Groupon filed for an initial public offering of up to $750 million. The Web site that sells discounts for local businesses said its revenues were $645 million in the first quarter of this year, on sales of 28.1 million groupons.
Citigroup (NYSE:C) shut down a $400 million proprietary hedge fund, the Quantitative Strategies Fund, as a result of new regulations that aim to stop proprietary trading, according to a report by Bloomberg.
The English FTSE 100 was down 1.4% to 5,848, the French CAC 40 slumped 1.9% to 3,890 and the German DAX was off 2% to 7,074.
In Asia, the Japanese Nikkei 225 plummeted 1.7% to 9,555 and the Chinese Hang Seng dropped 1.6% to 23,254.