By Jonathan Cheng
U.S. stocks declined Wednesday after a weak reading on U.S.
private-sector hiring added to concerns over a weakening European
economy.
The Dow Jones Industrial Average lost 32 points, or 0.2%, to
13248 in late trading Wednesday. The Standard Poor's 500-stock
index gave up six points, or 0.4%, to 1400, while the Nasdaq
Composite edged up three points, or 0.1%, to 3053.
Leading the losses were energy and financial stocks, which are
more sensitive to signs of economic improvement and deterioration.
Bank of America fell 1.3% and J.P. Morgan Chase lost 1.4%. Alcoa
led the Dow decliners, falling 2.6%, while Chevron and Exxon Mobil
dropped 1.4% and 1.2%, respectively.
The declines came after a report on private-sector job growth in
April showed an increase of just 119,000 jobs, well below
expectations for 175,000 new jobs and sharply lower than March's
downwardly revised gain of 201,000 jobs. The private-sector jobs
report is seen as a preview to the closely watched government
employment report due on Friday. Separately, factory orders in
March declined 1.5% from February, in line with expectations.
"Any way you slice it, it's still a troubling jobs report and it
suggests hiring trend is slowing," said Larry Glazer, managing
partner at Mayflower Advisors in Boston. "It's as much an
indication of the hiring trend slowing, as it is of expectations
being too high."
The weaker U.S. economic data, combined with disappointing
readings from Europe, presented a new potential challenge one day
after the Dow rose to close at its highest level since Dec. 28,
2007.
European markets erased earlier gains to trade flat or lower
after the euro-zone manufacturing purchasing manager's index fell
to its lowest level since June 2009. Meanwhile, the unemployment
rate rose to a euro-era high of 10.9% in March from February's
10.8%. Germany saw its unemployment rate rise for just the second
time in 15 months.
With most markets returning from the May Day holiday, the German
DAX index fell 0.8% after being up as much as 1.7% earlier in the
day. In France, the CAC-40 edged up 0.4% ahead of a televised
debate between President Nicolas Sarkozy and Socialist challenger
Francois Hollande.
"Our sense is that investors are playing it pretty
conservatively--there's still a healthy sense of skepticism," said
Michael Weinberg, global head of equities for Financial Risk
Management, a hedge fund investment firm that manages over $8
billion.
With Europe's economic picture dimming and China still under a
cloud, he said the threat of a global recession was still a
plausible scenario.
"One of our suspicions is that this year unfolds a lot like last
year, where we get these prolonged bouts of risk like we did in the
back half of last year," said Mr. Weinberg, who said he was
concerned about the impact of a Hollande victory in France's
election on markets. "We're in for a few months of choppy,
trendless markets."
Asian bourses were broadly higher on the back of Tuesday's U.S.
gains and positive Chinese data released Wednesday. China's
Shanghai Composite rallied 1.8% after the manufacturing purchasing
manager's index rose to 53.3 in April from 53.1 in March. Japan's
Nikkei Stock Average gained 0.3%.
Crude-oil futures declined 0.9% to $105.22 a barrel, while gold
futures slipped 0.5% to $1,653.40 an ounce. Copper, meantime,
declined 1.4%. The U.S. dollar surged against the euro and traded
flat against the yen. Demand for U.S. Treasurys rose, sending the
yield on the benchmark 10-year note back down to 1.924%.
In corporate news, Chesapeake Energy tumbled 14% to lead S&P
500 decliners, reversing Tuesday's gains, after the natural-gas
company's first-quarter earnings and revenue missed
expectations.
TripAdvisor led the S&P 500 gainers, rising 17% after the
travel site reported first-quarter earnings and revenue that topped
analyst projections.
MasterCard slipped 1% after the company reported an increase in
operating expenses, and paid more in rebates and incentives to
attract business. Rival Visa also declined 0.5%.
IntercontinentalExchange declined 2.8% after the commodities
exchange operator reported muted trade in its futures
franchise.
American Eagle Outfitters surged 17% after the teen-apparel
retailer raised its first-quarter earnings guidance, pointing to
stronger-than-expected sales and easing promotional activity. The
company also easily topped revenue expectations.
Charming Shoppes leaped 24% after the apparel retailer agreed to
be acquired by Ascena Retail Group for about $890 million in cash.
Ascena soared 11%.
CVS Caremark rose 2.7% after the pharmacy chain reported
better-than-expected first-quarter earnings and revenue, and raised
its full-year earnings outlook.
Broadcom edged up 0.5% after the semiconductor company reported
first-quarter adjusted earnings and revenue that topped analyst
forecasts, but also saw a decline in gross margins.
Homebuilders generally gained after Beazer Homes USA recorded a
surge in home closings and sounded a hopeful note for the months
ahead. D.R. Horton, KB Home and NVR all rose.
Protalix BioTherapeutics climbed 14% after the company said the
U.S. Food and Drug Administration approved Protalix, a drug
developed with Pfizer, for the treatment of Gaucher disease, a rare
genetic disorder. Pfizer slipped 0.7%.