By Anora Mahmudova and Sara Sjolin, MarketWatch
Services activity accelerates in April
U.S. stocks moved lower on Tuesday, as investors digested a
mixed bag of economic reports and earnings.
A trade-deficit report showed that the nation's trade gap hit
its highest level in seven years as the West Coast port dispute
ended. The trade widening trade deficit suggests that the U.S.
gross domestic product reading will go from a meager 0.2% to
negative territory when figures are revised later this month.
On the bright side , services activity accelerated in April to a
stronger-than-expected reading.
The S&P 500 (SPX) was off about 7 points, or 0.3%, to
2,107.70 with seven of its 10 main sectors trading lower. Utilities
and technology stocks led the losses.
The Dow Jones Industrial Average (DJI) lost 28 points, or 0.2%,
to 18,041. The Nasdaq Composite (RIXF) was hit the hardest,
dropping 43 points, or about 0.9%, to 4,972.88.
Jeff Clark, trading analyst at Stansberry Research, said recent
selling action reflect investor skittishness ahead of the June
Federal Open Market Committee meeting, where Fed officials will
weigh the pace of interest rate hikes.
"Over the past several years, 'buy the dip' strategy worked very
well, but it seems investors now turned to 'sell the strength'
mentality. We can see that from the market's inability to follow on
the rallies," Clark said.
"There is more downside momentum, which usually precedes a
correction. Markets are overdue for a correction and this one is
going to be a harsh one. I would not be surprised to see a 15%-20%
drawdown," Clark noted.
Data: Investors are already looking ahead to the top-tier
nonfarm-payrolls report on Friday, but have some data to digest
Tuesday.
The U.S. trade deficit soared 43% in March
(http://www.marketwatch.com/story/us-trade-deficit-leaps-43-in-march-to-highest-level-since-1996-2015-05-05),
largely reflecting the end of a labor standoff at West Coast ports
that allowed piles of imported goods sitting on docks to be
processed and shipped to domestic customers.
Services activity accelerated in April to a
stronger-than-forecast reading, according to Institute for Supply
Management data released Tuesday.
Earnings:Kellogg Co.(K) profit fell 44% as the company's
performance was hit by impact of a stronger dollar and other
expenses related to turnaround and pension plans, however the drop
in earnings was less than forecast. Shares were slightly
higher.
Sprint (S) said its loss widened in the fourth quarter and that
revenue also declined. Shares rose 0.6%.
Office Depot Inc.(ODP) said it swung to a profit in the first
quarte
(http://www.marketwatch.com/story/office-depot-matches-profit-expectations-but-misses-on-sales-2015-05-05)r,
but sales missed expectations.
Archer Daniels Midland Co.(ADM) reported a 15% drop in
first-quarter sales
(http://www.marketwatch.com/story/archer-daniels-midland-sales-fall-miss-estimates-2015-05-05)
as the strong dollar and weak markets led to softness in its
corn-processing business.
Walt Disney Co.(DIS) reported profits and sales that were better
than analysts' expectations
(http://www.marketwatch.com/story/disney-profit-and-revenue-top-estimates-2015-05-05).
After hours, Groupon Inc.(GRPN) is expected to report
first-quarter earnings of a penny a share. Herbalife Ltd.(HLF) is
forecast to post first-quarter earnings of $1 a share. On Monday,
Herbalife's biggest critic, Bill Ackman, reiterated his confidence
in his bet against the health-supplements company in a CNBC
interview at the Ira Sohn investment conference in New York.
Movers and shakers: Shares of Qualys Inc.(QLYS) plunged 24%
after the cloud-security company late Monday posted a disappointing
outlook
(http://www.marketwatch.com/story/comcast-cablevision-tyson-foods-earnings-in-focus-2015-05-01).
Other markets: Chinese stocks slid 4.1%, suffering their second
largest daily fall this year
(http://www.marketwatch.com/storyno-meta-for-guid).
European stock markets were struggling for direction Tuesday
(http://www.marketwatch.com/story/eu-lifts-eurozone-growth-forecast-2015-05-05-5485346).
Oil prices (CLM5) advanced and most metals rose. The dollar
(DXY) traded mixed against other major currencies.
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