Merck leads the Dow laggards after disappointing earnings
US stocks ended with solid losses on Wednesday, 01 May 2013. Although most markets across the globe were closed in observance of Labor Day, some countries continued reporting their economic data. US stocks declined Wednesday as the Federal Reserve said it would keep buying $85 billion in bonds each month, but may cut or increase the program depending on the economy. The commodities had a very weak day and most raw commodities witnessed steep fall. The dollar remained weak for the day.
For the day, the Dow ended lower by 138.85 points (0.94%) at 14,700.95. Nasdaq ended lower by 29.66 points (0.9%) at 3,299.13. S&P 500 ended lower by 14.87 points (0.93%) at 1,582.69.
. Most of the ten economic sectors ended lower led by energy, materials and utilities sectors. Twenty-five out of thirty Dow components ended lower led by Merck.
The Federal Reserve's policy-making committee's conclusion of a two-day meeting ended Wednesday afternoon with the much-anticipated FOMC statement containing no major surprises. As expected, the FOMC maintained its purchasing program at $85 billion per month, and kept its target Federal Funds Rate steady at 0-0.25%. The central bank also reiterated its goal of staying true to the current policy course until the unemployment rate declines to 6.5%. Today's statement did contain an explicit mention of a possible increase or decrease to the purchase program. However, this wasn't "new" as prior statements from the Fed have already allowed for the possibility of modifications to the program.
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Many expect the European Central Bank to cut interest rates when it holds its monthly meeting on Thursday. Recent weak EU economic data makes the case for such action by the ECB. An ECB rate cut would be viewed as friendly for the metals markets.
Disappointing results from companies, including MasterCard and Merck, were also weighing on the market. MasterCard Inc shares dropped 2.8% to $537.59 after the world's second-largest credit and debit card network reported revenue fell short of the average analyst estimate. Merck & Co reported lower-than-expected first- quarter sales as generic competition hurt demand and a stronger dollar hit overseas sales.
CVS Caremark shares hit a fresh record high after the pharmacy health care provider posted higher-than-expected earnings helped by more profitable generic drugs and a severe cold season that boosted sales at its drugstores.
Much of Asia and Europe celebrated public holidays Wednesday, which made for quieter dealings. China did report its official manufacturing PMI came in lower than expected, at 50.6 in April versus the March reading of 50.9. The weaker-than-forecast China PMI helped to put downside price pressure on the raw commodity markets Wednesday.
In the currency market, the dollar index, which weighs the strength of the dollar against a basket of six other currencies, fell by 0.23% on Wednesday.
In today's economic data, total construction spending fell 1.7% in March after increasing an upwardly revised 1.5% (from 1.2%) in February. The consensus expected construction spending to increase 0.5%. Most of the decline was the result of weaker public construction spending. That sector declined 4.1% in March after increase.
And, the Institute for Supply Management's manufacturing index fell to 50.7 in April, while a gauge of construction spending showed a 1.7% fall in March.
Gold for June delivery ended lower by $25.9 (1.8%) at $1,446.2 an ounce on the Comex division of the New York Mercantile Exchange on Wednesday. July silver ended lower by $0.84 cents (3.5%) at $23.34 an ounce on Wednesday.
Crude-oil prices ended substantially lower on Wednesday, 01 May 2013 at Nymex. Prices ended lower following weak Chinese data and latest weekly report showing more than expected rise in crude supplies for last week. Prices recouped back some losses after U.S. Federal Reserve made no changes to its bond-buying program, but said it was prepared to increase or reduce the pace of its purchases. Light and sweet crude for June ended lower by $2.43 (2.6%) at $91.03 a barrel on the New York Mercantile Exchange on Wednesday.
The U.S. Energy Information Administration reported a jump in last week's crude supplies that was more than four times higher than expected. Crude supplies rose 6.7 million barrels for the week ended 26 April 26. Market had expected a 1.4 million-barrel climb. The EIA report Wednesday showed that motor gasoline supplies declined by 1.8 million barrels, while distillate stockpiles rose by 500,000 barrels. Forecasts called for a decline of 900,000 barrels for gasoline, with distillate stockpiles expected to be unchanged.
For every stock rising, more than two fell on the New York Stock Exchange, where 712 million shares traded. Composite volume neared 3.5 billion.
Indian ADRs ended lower on Wednesday. In the IT space, Infosys was down 0.5% and Wipro was down 2.4%. In the Banking space, HDFC Bank was down 0.5% and ICICI Bank was down 1.11%. In the Telecom space, Tata Communication was down 1%. In other space, Tata Motors was down 1.7%, Dr Reddys was down 1.2% and Sterlite was down 2.5%.
Tomorrow, investors will receive a full slate of economic data tomorrow with the April Challenger Job Cuts Report set to kick things off at 7:30 ET. Weekly initial claims, preliminary first quarter productivity, first quarter unit labor costs, and the March trade balance will all be released at 8:30 ET.
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