U.S. Indexes Down 2% on Global Economic Slowdown

Bikram Pandey
01 Jun, 2011
New York City

U.S. indexes declined after a string weak economic data. The S&P 500 index, the Dow and the Nasdaq fell more than 2%. General Motors auto sales in May declined 1.2% and Ford sales dropped 2.4%. Global markets face slowing growth in Asia, uneven recovery in the U.S. and weak economies in Europe.

[R]4:40 PM New York – U.S. indexes declined after a string weak economic data. The S&P 500 index, the Dow and the Nasdaq fell more than 2%. General Motors reported May auto sales declined 1.2% and Ford sales dropped 2.4%. Global markets face slowing growth in Asia, uneven economic recovery in the U.S. and weak economies in Europe.[/R]

U.S. indexes traded lower after private sector added 38,000 jobs in May, less than estimated. Indexes accelerated the decline in the afternoon as weak auto sales only added to market jitters after a string of weak economic news in the last three days. GM auto sales in May declined 1.2% and Ford sales fell 2.4%.

Global markets were also cautious after China, India and Australia reported weak economic data.

U.S. manufacturing expansion decelerated at the fastest pace in 27 years and construction spending highlighted the ongoing drag on the economy.

In merger news, Sealed Air agreed to acquire Diversey Holdings for $4.3 billion. Phillips-Van Heusen swung to profit.

On the earnings front, Dollar General first quarter net income increased 15% to $157 million. EnerSys fourth quarter net earnings grew to $30.1 million. Phillips-Van Heusen first quarter net income was $57.7 million. VimpelCom first quarter net income surged 55% to $589.7 million.

European indexes slid after manufacturing growth in China slowed and Greece remained in focus. France-based Schneider Electric agreed to acquire Telvent for $2 billion. Intact Financial offered C$2.6 billion for AXA Canada. Lenovo agreed to buy Germany's Medion for €13 per share.

Manufacturing sector growth declined in the euro area with the growth in Germany slumping to a seven-month low in May. Swiss retail turnover growth accelerated in April and French unemployment fell in the first quarter.

The UK mortgage approvals fell, gross lending improved and M4 money supply declined in April. Manufacturing index fell more than estimated in May. Kennedy Wilson Holdings surged 4.1% after acquisition of Bank of Ireland Real Estate Investment Management.

Stocks in Japan extended gains for the second day in a row but the gains were muted. Resources linked stocks closed higher on a rise in commodities and metals prices. Automakers led the gainers. Solar energy linked stocks gained on the prospect of higher government commitment.

Stocks in Mumbai trading closed higher after the release of auto sales. The sales at Tata Motors, Maruti Suzuki and TVS Motor increased less than expected. April exports increased 34% and imports rose 14% and deficit in the month declined 18%.

Devastating weather dragged the economy in the first quarter. The GDP shrank 1.2%, first decline since the fourth quarter of 2008 and exports plunged 8.7%, the largest fall in 37 years. The dollar gained. Fortescue Metals chief executive Andrew Forrest resigned.

Commodities, Bonds and Currencies

The 10-year bond yield decreased to 2.94% and 30-year bond added to 4.14%.

The U.S. dollar increased to $1.432 to a euro and fell against the Japanese yen to 80.95 yen.

Immediate delivery futures of Texas crude oil decreased $2.50 to $100.19 a barrel and futures of natural gas fell 0.03 cents to $4.62 per mbtu and gasoline prices declined 5.50 cents to 299.45 cents a gallon.

In metals trading, copper decreased 8.40 cents to $4.09 per pound, gold increased $2.60 to $1,539.40 per ounce and silver declined $1.61 to $36.69.