By Ellie Ismailidou and Sara Sjolin, MarketWatch
But private-payroll gains miss expectations; productivity
falls
U.S. stocks trimmed early losses Wednesday, after a gauge of
activity in the U.S. services sector rose to its highest level this
year, beating economists' expectations.
The strong ISM services index
(http://www.marketwatch.com/story/ism-services-index-climbs-to-557-in-april-2016-05-04)sparked
some risk appetite, pushing the main benchmarks off session lows
reached earlier, after a flurry of weaker-than-expected economic
reports, including private-payrolls data, suggested the economy
continues to grow at a slow pace.
The S&P 500 was down 12 points, or 0.6%, to 2,051, led by a
sharp drop in materials shares, down 1.2%, followed by industrials,
down 1%.
The Dow Jones Industrial Average recovered from a 125-point loss
to trade down 75 points, or 0.4%, to 17,676, weighed by losses for
United Technologies Corp.(UTX) and Cisco Systems Inc.(CSCO), down
1.6% and 1.4% respectively.
Meanwhile, the Nasdaq Composite was down 27 points, or 0.6%, at
4,736.
The moves came a day after stocks fell to their lowest level in
three weeks on Tuesday
(http://www.marketwatch.com/story/stock-futures-slide-as-fear-creeps-into-the-markets-2016-05-03),
as weaker-than-expected manufacturing data in China and a cut of
interest rates in Australia revived worries about an overseas
economic slowdown.
On Wednesday, the ADP employment number for April
(http://www.marketwatch.com/story/adp-reports-private-sector-job-gains-slowed-in-april-2016-05-04)
came in at 156,000, well short of the 200,000 jobs expected,
showing that private payroll gains slowed markedly in April. The
report is seen as a precursor to the top-tier nonfarm-payrolls data
out on Friday
(http://www.marketwatch.com/story/if-the-economy-springs-back-jobs-and-auto-sales-will-lead-the-way-2016-05-01),
which are closely watched as they are seen as playing a big part in
determining the future path for Federal Reserve interest rates.
Meanwhile, the productivity of U.S. businesses and workers
(http://www.marketwatch.com/story/us-productivity-drops-1-in-first-quarter-2016-05-04)
fell by a 1% annual rate in the first quarter, marking the fourth
decline in the past six quarters.
On the bright side, the U.S. trade deficit shrank in March
(http://www.marketwatch.com/story/us-trade-deficit-sinks-17-in-march-to-404-billion-2016-05-04)
to its lowest level in more than a year, but the plunge still
reflected a tough climate for American exporters and more caution
on the part of consumers.
The flurry of data continued to "paint a picture that can be
described as 'growth purgatory,'" said Michael Arone, chief
investment strategist at State Street Global Advisors.
According to Arone, the U.S. economy is "stuck in low and slow
gear" where data constantly miss expectations but they are not bad
enough to indicate a recession is on the horizon.
Wednesday's mixed data suggested that "the services sector
continues to carry the weight of the U.S. economy, as it's less
vulnerable to dollar volatility and soft global trade," said Peter
Boockvar, chief market analyst at The Lindsey Group, in emailed
comments.
Particularly in regards to the labor market picture, "the
discrepancy between ADP and this ISM survey makes Friday's payroll
report more uncertain relative to expectations," Boockvar
added.
Meanwhile, investors were watching moves in oil prices , which
over the last two sessions have shed some 5% of the more than 60%
gain since their lows earlier this year. On Wednesday, oil futures
pared early gains after a report by the U.S. Energy Information
Administration showed larger-than-expected supply.
A nascent rebound in the dollar
(http://www.marketwatch.com/story/dollar-advances-for-second-day-against-key-rivals-2016-05-04)could
also have implications for U.S. stocks, analysts said, as the
dollar index has shed nearly 6% of its value year-to-date, which
many analysts say has helped equities by making goods produced in
the U.S. more competitive in global markets.
Fed speakers: Minneapolis Fed President Neel Kashkari, who isn't
a voting member of the Fed's policy-setting committee this year,
will speak in Rochester, Minn., at 5:30 p.m. Eastern.
Movers and shakers:Etsy Inc.(ETSY) jumped 8.8%, after the online
marketplace posted a surprise profit
(http://www.marketwatch.com/story/etsy-rises-after-surprise-profit-from-services-sold-to-sellers-2016-05-03)
in the first quarter thanks to strong revenue gains in services
sold to the users who sell merchandise on its site.
Under Armour Inc.'s stock (UA) dropped 6.3%, after the athletic
gear company announced another round of executive departures.
U.S.-listed shares of BHP Billiton(BHP.AU) and Vale SA(VALE5.BR)
slumped 5.9% and 5.4%, respectively. The moves came after Brazilian
federal prosecutors filed a civil lawsuit Tuesday over a
catastrophic dam failure in November. Prosecutors are seeking up to
155 billion reais ($43.55 billion)
(http://www.marketwatch.com/story/mining-firms-bhp-vale-face-44b-lawsuit-in-brazil-2016-05-03)
for cleanup and remediation. The dam was run by Samarco Mineração,
a joint venture between BHP and Brazilian miner Vale.
Priceline Group Inc.(PCLN) plunged 10.1% after the online
travel-services company reported first-quarter results that beat
expectations, but provided a second-quarter profit outlook that was
well below analyst projections
(http://www.marketwatch.com/story/pricelines-stock-tumbles-as-profit-outlook-falls-well-short-of-expectations-2016-05-04).
Time Warner Inc.(TWX) gained 3.4% after its first-quarter
earnings beat Wall Street forecasts.
Kate Spade & Co.(KATE) shares were little changed after the
clothing and accessories company affirmed its full-year 2016
revenue guidance
(http://www.marketwatch.com/story/kate-spade-profits-fall-below-estimates-reaffirms-full-year-guidance-2016-05-04).
Other markets: After a wobbly start to the day, European markets
moved lower
(http://www.marketwatch.com/story/european-stocks-wobble-after-earnings-deluge-2016-05-04),
as investors assessed the latest raft of earnings reports.
Meanwhile in Asia
(http://www.marketwatch.com/story/asian-stocks-down-on-oil-woes-slow-growth-2016-05-04),
most stock benchmarks closed firmly lower after an earlier fall in
oil prices and a plunge in shares of Anglo-Australian miner BHP
Billiton
(http://www.marketwatch.com/story/mining-firms-bhp-vale-face-44b-lawsuit-in-brazil-2016-05-03)(BHP.AU)
(BHP.AU) (BLT.LN).
Metals dropped across the board, with gold down 0.6%, while
Treasury yields were near a two-week low.
(END) Dow Jones Newswires
May 04, 2016 11:30 ET (15:30 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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