U.S. Stocks Extend Losses; Groupon Files to Raise $750 Million

Bikram Pandey
02 Jun, 2011
New York City

U.S. indexes extended losses for the second day as investors shied away from risky assets. Latest economic data only confirmed weak and mixed economic scenario. Macy

[R]4:00 PM New York – U.S. indexes extended losses for the second day as investors shied away from risky assets. Latest economic data only confirmed weak and mixed economic scenario. Macy’s and Costco led the increase in same store sales in May. Crude oil hovered near $100 and gold eased.[/R]

U.S. indexes traded sideways a day after dropping sharply on a string of weak domestic and international weak economic data.

The market sentiment is slowly shifting in the negative territory as investors question the high valuations in the U.S. when the global and U.S. economic backdrop is weakening.

Increasingly, investors are shying away from risky assets in the U.S. on the uneven economic expansion, in Europe on the rising debt loads of peripherals euro-zone nations and in Asia on the slowing economic growths in China and India.

In U.S. economic news, weekly jobless claims fell 6,000 to 422,000 and worker productivity increase was revised higher in the first quarter.

In merger news, Marathon Oil acquired Hilcorp’s Eagle Ford Shale assets for $3.5 billion.

Groupon Inc filed with the U.S. regulators to raise as much as $750 million in a public offering managed by Goldman Sachs, Morgan Stanley and Credit Suisse.

Groupon said revenues in first quarter to March soared to $644.7 million from $44.2 million a year ago and reported net loss of $103 million. For the year 2010, total sales were $713.3 million.

The number of subscribers increased to 83.1 million in the first quarter from 3.4 million a year ago and number of discounts coupon deals soared to 28.1 million from 1.8 million. The company has deals with 57,000 local merchants in 43 countries.

Retail sales at chain stores increased in May, but at a slower pace than in April when calendar shift pushed holiday sales higher. Discounters like Costco reported sharply higher same store sales but department stores Macy’s led the sales among 24 largest chains with a surge of 20%.

In earnings, Copart third quarter net income rose 13% to $50.1 million. Joy Global second quarter net income increased 34% to $161.97 million and lifted the annual earnings outlook.

The European indexes slumped after a ratings agency cut Greece's credit rating to junk status with a negative outlook. Spain sold €3.95 billion of 2014 and 2015 bonds. The European Union extended aid to Ireland and Spain.

In European economic news, Spain’s unemployment declined from the recent highs but hovered near elevated levels. Spain’s unemployment declined at a faster pace in May.

German exports increased 18.8% in the first quarter. Romanian producer price inflation eased to 9.6% in April. Hungary's trade surplus improved in March.

The UK indexes closed lower and the UK construction sector activity rose more than estimated in May. Retailer ASOS plunged 9% on bleak outlook.

Stocks in Tokyo plunged tracking a market route in Asia. Global economic worries compounded the ongoing political uncertainties in Japan. Prime Minister Naoto Kan survived no-confidence motion only after he offered to resign after nuclear disaster is under control. U.S. sales of Japanese automakers slid as much as 33%.

Stocks in Mumbai trading closed lower following a weakness in Asian markers. The global economic slowdown worries dragged Asian markets between 1.2% and 2.3%. In addition, the latest read on wholesale inflation did not show any significant improvements. Hero Honda and Bajaj Auto unit sales in May gained more than 15%.

Australian benchmark index plunged following a weakness in Asia and tracking losses in overnight trading in New York. Markets in Asia dropped between 1% and 2%. Global economic slowdown worries trumped the ongoing euro-zone debt worries. April retail sales in Australia increased 1.1%.

Commodities, Bonds and Currencies

The 10-year bond yield increased to 3.03% and 30-year bond rose to 4.25%.

The U.S. dollar increased to $1.447 to a euro and fell against the Japanese yen to 80.89 yen.

Immediate delivery futures of Texas crude oil decreased $0.22 to $100.51 a barrel and futures of natural gas fell 0.17 cents to $4.80 per mbtu and gasoline prices declined 0.40 cents to 297.33 cents a gallon.

In metals trading, copper decreased 0.90 cents to $4.10 per pound, gold decreased $9.40 to $1,533.80 per ounce and silver fell $1.53 to $36.16.