Stocks slide on weak economic data

Private-sector hiring and weekly jobless claims disappoint investors. European markets finish lower as turmoil persists. Costco and Gap miss same-store sales forecasts.

By TheStreet Staff May 31, 2012 7:18AM

TheStreet

Updated at 12:06 p.m. ET


By Shanthi Bharatwaj


Stocks were off their lows but remained in the red Thursday after reports showed a disappointing pace of job creation and slower economic growth than initially thought.

 

Demand for haven assets continued to surge amid heightened eurozone uncertainty, with the yield on 10-year Treasurys still hitting record lows.

 

The Dow Jones Industrial Average ($INDU) was down by 51 points at 12,368. Earlier in the session, the index fell to as low as 12,316. The S&P 500 ($INX) was lower by 8 points at 1304. The Nasdaq ($COMPX) was dropping 25 points at 2,812.


Twenty-three out of the 30 Dow components were trading in the red, with Caterpillar (CAT), Exxon Mobil (XOM)  and Bank of America (BAC) leading the index lower.


Shares in capital goods, energy and materials were the worst performers.


Heading into this final session of the month, May was set up for a particularly ugly finish. The S&P 500 is on pace for its worst monthly slump since September. The index has declined 6.1% this month through Wednesday.

The Dow, down 6% so far, has had only five positive trading sessions over the month, its worst performance since May 2010, when concerns about Greece first emerged. The Nasdaq has lost nearly 7%. 


Worries about the fate of the euro and the impact of a global slowdown has led investors to abandon equities and seek safe havens such as U.S. treasury bonds.


"A lot of people really don't trust this market. Maybe they say the market is rigged or it's insider's game, so you just see a lot of people taking their money out of U.S. equities and putting them into bonds and looking for capital preservation instead of the risk-on trade," Joe Bell, senior equity analyst at Schaeffer's Investment Research, said.


"The stunning thing to me about . . . the way the market is behaving now is, when you look at 30-year Treasurys, they're behaving as if a Lehman-like event has already happened," said Michael Gayed, a chief investment strategist at Pension Partners LLC.

 

Investors betting on U.S. economy withstanding global pressures were in for some disappointment Thursday as a raft of economic data pointed to slowing growth.

 

ADP's employment report showed companies created 133,000 jobs in May, underwhelming expectations. Economists had expected the private sector to have added 148,000 jobs in May, according to Thomson Reuters. In April, companies created 119,000 jobs

 

Earlier Thursday, global outplacement firm Challenger, Gray and Christmas said employers announced plans to lay off 61,887 workers in May, an eight-month high and up 67% from a year earlier.

 

The Labor Department said initial jobless claims for the week ending May 26 jumped by 10,000 to 383,000, higher than the 370,000 economists were expecting.

 

The reports come ahead of Friday's all-important jobs report. The Labor Department is expected to say that the economy created 150,000 jobs in May, up from 115,000 in April, according to economists surveyed by Thomson Reuters.


Another month of bad news on jobs could further dampen investor sentiment and revive expectations that the Federal Reserve will do more to boost the economy.

 

The Bureau of Economic Analysis at the Department of Commerce said the economy expanded at a rate of 1.9% during the first quarter, down from the advance estimate of 2.2%. That was in line with expectations.

 

The Institute for Supply Management said business activity in the Chicago region significantly slowed, with the purchasing managers' index coming in at 52.7, down from 56.2 in April.

 

The consensus expected Chicago PMI to come in at 57 for May. A reading over 50 indicates expansion.


July oil futures were lower by $1.26 at $86.56 a barrel, and August gold futures were lower by $1.6 at $1,564.10 an ounce in volatile trading.


The benchmark 10-year Treasury was rising by 22/32, lowering the yield to another record low of 1.549%, and the greenback was up by 0.1%, according to the dollar index.

 

The euro was trading flat against the dollar at $1.235 near its two-year low.

 

European markets finished in the negative Thursday, reversing an early bounce, as markets were unable to shake off concerns about the region's debt crisis.

 

The FTSE in U.K. finished flat, while the DAX in Germany lost 0.6%.


Stocks in the region had shown signs of stabilizing earlier in the session amid a clutch of better-than-expected economic data. Inflation in the 17-nation area fell to 2.4% from 2.6%, the slowest pace since February 2011, while the German unemployment rate fell to 6.7% in April.

 

Asian markets sold off, tracking the risk-off trade in European and U.S. markets on Wednesday. Hong Kong's Hang Seng dropped 0.3%, while Japan’s Nikkei declined 1%.

 

In corporate news, shares of Talbots (TLB) jumped more than 90% after it agreed to be taken private by Sycamore Partners at $2.75 per share.


The nation's retailers, reported mostly better-than-expected same-store sales numbers, though some big names disappointed.


Gap (GPS) said comparable-store sales rose 2% in May, less than the 3.1% jump analysts were predicting. Shares were down 1.8%.


Target (TGT) reported a 4.4% growth in same-store sales in May, beating analyst estimates. Shares were rising 0.5%.

 

Costco (COST) said same-store sales rose 4%, short of the 4.3% analysts were expecting. Shares were edging higher by 0.7%.

 

TiVo (TIVO) reported weak first-quarter results and second-quarter guidance. The digital video recording company posted a loss of 17 cents a share on revenue of $67.8 million. Analysts were expecting a loss of 15 cents a share on $54.89 million in service and technology revenue.

 

For its fiscal second quarter, TiVo said it expects service and technology revenue to be between $53 million and $55 million and projects a net loss of $28 million to $30 million. Analysts expect revenue of $56.5 million and a loss of $27 million.


Shares were declining 6.1%.

 

Ciena (CIEN) shares were surging 7.5%  after the network equipment maker reported an adjusted profit of 4 cents per share, beating expectations of a loss of 3 cents per share.


More from TheStreet.com

287Comments
May 31, 2012 11:06AM
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Even though the economy is not the only issue in the election, by far, it's the most important one. Now base Obama's performance vs. Romney's (in the private sector) Romney clearly comes out on top-Not perfect- (if he, or anyone else was, they would be our savior longbeach)

 

Now look at his foreign policy: A disaster; alienated half of economies in So. America, talking on a open mic with the Russians about defensive shields. But he got Osama (personally- I would have put him in chains & paraded him like a DOG around the world-then publicly shoot  him.)

 

I leave it at that for now-but I've got more!

 

May 31, 2012 11:04AM
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And to make things worse we wont be able to buy a big soda and enjoy it because of this penis head Bloomberg...So sad.
May 31, 2012 11:04AM
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QE3 should provide at least a temporary boost to stocks when uncle Ben makes a speech about it around the 4th of July. Or maybe he'll hold of until Jackson Hole in August. Ben should sign up for a climb  to the summit of the Grand Teton  with the Exum Guides to inspire us. Or even better, do it solo! Just to get away from the office and Press for a few days. Unless Anderson Cooper is a rock climber
May 31, 2012 11:02AM
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I finally figured out what DOW stands for, "Down on Worries"
May 31, 2012 11:02AM
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The Big Banks are doing just fine with Billions upon Billions in revenues and the assistance from the Fed to print more money if they need more and the administration to protect them from the 99% with regulations.  The banks are swallowing up properties in droves owned by minorities, that's right, blacks and latinos are gettin screwed.  The got coned by the biggest con man of all.  If you lost your job, they take your house and all the equity in it then turn around and sell it for to the 1% for a profit then rent to you.   What a great deal for the Banks and the 1%.  It's a win..win.. for them and a loose..loose for the working guy. 
May 31, 2012 10:55AM
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Well, manipulators once again in complete control....At 1045 hrs they called to accelerate the selling so we should be down triple digits anytime now and unfortunately there is nothing we can do....These scumbags keep making tons of dough while most people out there are losing tons....Yes, the numbers were ugly this morning and tomorrow looks even scarier...The only ones laughing down here are these cheating fricking crooks...People, Obama needs to go, yesterday. More later.
May 31, 2012 10:54AM
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"Several top retailers reported stronger-than-expected sales in May, as shoppers overcame growing anxiety about the U.S. economy and the job market."

 

The real reason sales may be up is due to retailers raising prices and not because they are selling more merchandise.  So if a retailer reports a 4-6% increase it may actually mean their comp store sales are down considering the average retailer has raised prices at least 10-12% since the previous year.

May 31, 2012 10:53AM
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 Stocks will reverse or accelerate their decline as soon as the election results in Ireland are in. They reject the bailout terms, S&P below 1295. They accept, S&P at 1305-1310
May 31, 2012 10:51AM
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1 hour ago
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And the beat goes on down here, volume still awful and manipulators taking control early so we are in the red already....Lets face it though, numbers were not good this morning and only God and the government know what the job numbers will be tomorrow. They may be so bad that even manipulating them like they always do may not look good at all and will drop us a lot more....Oh well, we will find out soon enough. For now just remain on the sidelines, scumbags in charge already so down we are going...More later.
May 31, 2012 10:49AM
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beach    obame wants all my money    so you think i should send it overseas?
May 31, 2012 10:48AM
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 It wasn't the Socialists who Suckerberged ya on Facebook. 25% , POOF! and the greed is good dudes say thank you very much!
May 31, 2012 10:47AM
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"Glad to hear that Mister, so let me ask. Do you think it shows good leadership by putting your money in offshore accounts? "

As long as Obama's in office, and with the state of our domestic banks, I think it shows good common sense. Of course, he could have put it in the market.........
May 31, 2012 10:44AM
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ABS, As a Venture Capitalist, Obama has been dismal.  He has a long list of failed companies that he lent billions of taxpayer dollars too that have failed.  Many more failures are likely.  The government cannot prop up companies that try to fly in the face of economics.   Once the government subsidies stop the job and companies disappear.   

This begs the question, would Romney be a better  venture capitalist?  Short answer:  Yes, without a doubt.  But the real problem is that the government should not be in the Venture Capital business to start with.  Mr. Romney must get us out of that business, rather than try to do a better job at it.

The one clear thing is this...  Obama has to go!
May 31, 2012 10:41AM
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"Mister maybe you can ask your messiah Romney to do so. LOL "

He's not my Messiah, but at least he's not the Anti Christ.
May 31, 2012 10:39AM
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We just went negative 4% for 2012 money wise!
May 31, 2012 10:38AM
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ADP is a thumbnail sketch....Sometimes fairly close....A payroll Company..

 

The BLS is much more accurate and a cross section of the Country.

 

This is the last time.

May 31, 2012 10:37AM
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If oil inventories come in 'greater than expected', don't 'freak out' when it causes our markets to go lower. Besides; this will be good for even lower gas prices this summer. Remember the Saudi's increased production, so did Iraq, and even Venezuela (LOE would love it there judging by all those comments) So.... Let's be positive; this could work out good for us before the day is done.
May 31, 2012 10:37AM
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You idiots who voted for Ostupid are just going to have to suck it up.
May 31, 2012 10:36AM
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"Romney was 47th out of 50 in job creation as governor of Massachusetts"

 

Anyone know the UE rate when he was in?  Sounds bad enough 47 of 50, but what if the UE rate was 4% or "full employment"?

May 31, 2012 10:33AM
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I would appreciate someone explaining to me the difference between the private sector job report which ADP produces vs the Labor Dept job report.  It seems to me, it would make sense to have just one report monthly which shows the jobs added in the private sector and those added in the public sector with a total and have prior months to compare to.  Also...do either of these two reports take into consideration the layoffs that occur?  Thanks..
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