U.S. Stocks Fall, Pulled Down by Oil
Source: http://feedproxy.google.com/~r/ContrarianProfits/~3/PgEXsS6oGNA/16739Posted on Friday, May 15th, 2009 | In Market Commentary
U.S. stocks and oil prices turned south on Friday as investors questioned recent rallies in the face of economic data that still shows a mixed picture of when economies will rise from a deep global recession.
The dollar and yen rose as worries persisted about global economic prospects despite a batch of better-than-expected U.S. economic data, prompting investors to seek shelter in the two safe-haven currencies.
Gold climbed to a six-week high after data showed U.S. core inflation rose more than expected in April, boosting the precious metal’s appeal as a hedge against rising prices.
Oil fell toward $56 a barrel, pressured by weak global demand and a stronger dollar.
Europe sank to what may have been the recession’s low point in the first quarter of this year as tumbling German exports and investment plus further sharp drops in output elsewhere hastened the pace of a year-old contraction.
Official GDP estimates showed the period was the worst since records at the European level began in 1995.
“Overall risk appetite is still down because of the bad numbers from Europe,” said Matthew Strauss, senior currency strategist at RBC Capital, in Toronto.
European shares closed higher, with gains for most banks outweighing losses for defensive plays such as telecoms.
But U.S. stocks turned lower after earlier gains due to the expiration of option contracts and a fresh assessment of a jobs report on Thursday that was worse than expected, said Rick Meckler, president of LibertyView Capital Management in New York.
“Yesterday’s rally, given the news, caught people off guard and left the market in a place where no one’s quite sure of the next direction,” Meckler said.
“With the weekend coming up and the potential for weekend news, some people are taking some money off the table,” he said.
Shortly after 1:30 p.m., the Dow Jones industrial average <.DJI> fell 46.43 points, or 0.56 percent, to 8,284.89. The Standard & Poor’s 500 Index <.SPX> shed 8.77 points, or 0.98 percent, to 884.30. The Nasdaq Composite Index <.IXIC> slipped 4.02 points, or 0.24 percent, to 1,685.19.
The FTSEurofirst 300 <.FTEU3> index of top European shares rose 0.5 percent to close at 839.94 points. Over the week, the index fell 3.1 percent, but is up 30 percent from a lifetime low on March 9.
But analysts were skeptical about when, and how strongly, an economic recovery will come through.
“We’ve had a spectacular rally,” said Philip Lawlor, chief portfolio strategist at Nomura. “Risk appetite has rebuilt. The question is about more green shoots.
“I don’t think the data is actually going to turn positive for another six or nine months,” he said.
U.S. and euro-zone government debt slipped after U.S. industry and consumer sentiment reports bolstered hopes the economy might soon start to recover.
U.S. industrial production fell 0.5 percent in April, a more modest pace than in recent months and less than the 0.6 percent economists had expected.
The data dimmed the allure of safe-haven investments such as U.S. Treasuries. Separate reports showing improved national consumer sentiment and a slower rate of contraction in New York state manufacturing this month also trimmed flight-to- safety bids.
The benchmark 10-year U.S. Treasury note fell 16/32 in price to yield 3.16 percent. The 2-year U.S. Treasury note fell 1/32 in price to yield 0.87 percent.
In Europe, June Bund futures fell 53 ticks on the day to 121.17, well off a one-week high of 122.07 set earlier in the session.
The dollar rose against a basket of major currencies, with the U.S. Dollar Index <.DXY> up 0.41 percent at 82.777.
The euro fell 0.80 percent at $1.3524. Against the yen, the dollar was down 1.04 percent at 94.87.
U.S. light sweet crude oil fell $2.06 to $56.56 a barrel.
Spot gold prices rose $4.70 to $930.05 an ounce.
Asian stocks rose as investors bought shares that stand to benefit from an expected global recovery. MSCI’s index of Asia Pacific stocks outside Japan rose 1.7 percent, while Japan’s Nikkei share average <.N225> added 1.9 percent,
May 15 (Reuters)
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