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US: weaker economic numbers trigger bearish sentiment

Zareena Sayeedova, Leading Analyst, Global Markets (Finam)

On Wednesday, April 4, US equity benchmarks saw mild losses on the back of somewhat disappointing economic data. For the record, the ISM’s services-sector index dropped in March from 57.3 to 56 against consensus forecasts of 57, while the ISM’s Non-Manufacturing Index fell from 62.6 to 58.9,and a contraction to only 62 had been anticipated. At the same time, the ADP report for March slightly beat forecasts, but showed weaker numbers vs. February.

Numbers out of Europe were no better, although in March the business activity in the services sector improved in most countries, while other indicators caused concern on the part of economists as Germany’s industrial orders rose only 0.3% in February against average forecasts of a 1.2% increase, the Eurozone’s retail sales dropped 2.1% y-o-y and 0.1% m-o-m in February, i.e. far below the forecasts.

Spain’s debt auction turned out to be worse than usual as the country managed to sell paper for EUR 2.59 bn, while the target was EUR 3.5 bn.

Exchanges still discussed the Fed minutes where no hint was dropped on QE3, and this also made traders bearish.

As for the indexes, the Dow Jones Industrial Average lost 0.95% to finish at 13,074.75, the Standard & Poor's 500 Index shed 1.02% to 1,398.96 and the technology-heavy Nasdaq Composite pulled back 1.46% to end the session at 3,068.09.

In commodities, NYMEX light, sweet crude for May delivery slid 2.4% to USD 101.47/bbl, while COMEX gold for April delivery declined 3.5% to USD 1,612.30/oz. In FX trading, the dollar rose against the euro and the pound, but dropped versus the yen.

In the blue-chip segment, only a few plays posted gains, including AIG, AT&T, International Paper and Merck. Among the decliners, the likes of Alcoa, Bank of America, Cisco Systems, JPMorgan and Microsoft pulled back over 2%.

Of the S&P 500 Index’s major sectors the worst performer was PC and software suppliers (off 1.4%) led by the world’s largest flash memory producer SanDisk that dove 9.4% after cutting guidance for sales and gross margin for the quarter ending April 1. Also, leading DRAM supplier Micron Technology plunged 4.1%.

Industrial conglomerate General Electric eased 1.1% on news international rating agency Moody’s downgraded the company’s credit rating by two notches.

Home builder Hovnanian Enterprises plummeted 8.5% on news the company plans to sell 25 mn Class A shares.