Steep drop for US stocks

Economic and earning reports push stocks lower

Mixed batch of economic data and a weak set of earning reports pushed US stocks considerably lower on Thursday, 24 June 2010. Though indices mired in the red since the entire day on Thursday, losses steepened in the final hour of trading. With today's losses, US stocks suffered four consecutive days of losses.



For the day, that ended on Thursday, 24 June 2010, Dow ended lower by 145.64 points at 10,152.8. Nasdaq ended lower by 36.81 points at 2217.42. S&P 500 ended lower by 18.35 points at 1,073.69.

All ten economic sectors ended lower led by consumer discretionary, materials, financial and energy sectors. Pfizer, JP Morgan Chase and Bank of America led the decliners among the Dow components.

Among economic reports expected for the day, The Commerce Department reported on Thursday, 24 June 2010 that the steady upward trend in the manufacturing sector hit a bump in May as a big drop in orders for new airplanes pushed total durable-goods orders down 1.1%, the largest decline since last August. April's orders were revised up to a 3.0% gain from 2.8% previously reported.

The 29.6% drop in orders for civilian aircraft accounted for most of the 1.1% decline in May. Aircraft orders had soared 215% in April. Excluding the drop in transportation orders, orders were up 0.9% in May, the third increase in the past four months. Orders for core capital-equipment goods rose 2.1% in May after a 2.7% fall in April, signaling that the general upward trend in manufacturing remains in place.

Separately, the Labor Department reported on Thursday, 24 June 2010 that initial claims (first-time applications for state unemployment benefits) fell by 19,000 last week to a seasonally adjusted 457,000, the lowest in six weeks confirming that U.S. labor markets remain weak. The report was close to market expectations, as market was looking for a drop to 460,000.

The four-week average of new claims was roughly unchanged at 462,750. The four-week average is considered a better gauge of labor-market conditions than the volatile weekly number, which can be influenced by non-economic factors such holidays, weather or strikes.

Initial claims are down about 24% compared with the same week a year ago but are down only about 1% since the first of the year. Continuing claims are down about 30% compared with a year ago and down about 9% since the first of the year.

Among earning reports expected for the day, ti the consumer-discretionary sector, Bed Bath & Beyond dropped 5.6% after its current-quarter earnings outlook fell below analysts' estimates. Nike declined 4% after the athletic-shoe and apparel maker's revenue growth missed analysts' expectations.

Among the Dow components, Bank of America fell 2.6% as House and Senate lawmakers sought to reach agreement on the final pieces of legislation that is expected to tighten oversight of the financial industry more than many had expected. Pfizer dropped after saying it would suspend osteoarthritis trials of its pain drug tanezumab.

Volatile crude oil prices managed to shrug off earlier weakness and inch up on Thursday, 24 June 2010 at Nymex. Prices fell earlier due to weaker than expected set of economic reports, which questioned crude's demand in the coming months. But a weak dollar helped crude finish in the green. On Thursday, crude-oil futures for light sweet crude for August delivery closed at $76.35/barrel (higher by $0.21 or 0.2%). Last week, prices gained 4.6%.

Also on Thursday, July natural gas retreated 6 cents, or 1.2%, to settle at $4.74 per million British thermal units. The U.S. Energy Information Administration reported on Thursday that inventories of natural gas increased by 81 billion cubic feet in the week ended 18 June. That compares to a five-year average of 86 billion cubic feet.

In the currency market on Thursday, the dollar index, which measures the strength of the dollar against a basket of six other currencies fell by 0.2%.

Indian ADRs ended mostly lower on Thursday. HDFC Bank and ICICI Bank were main losers shedding 2.6% and 2.8% respectively. Wipro Tech lost 2.1%.

For tomorrow, the economic data expected is the third release of the GDP figure. Other than that, a few earning reports are expected.