Wall Street Lower on Weak Sentiment, ECB Holds Rates

Bikram Pandey
03 May, 2012
New York City

U.S. indexes traded lower after weekly jobless claims fell to one-month low and the service industry expanded at a slower pace in April. Green Mountain Coffee plunged 46% after it lowered its earnings outlook. European Central Bank left rates at 1%.

[R]3:30 PM New York – U.S. indexes traded lower after weekly jobless claims fell to one-month low and the service industry expanded at a slower pace in April. Green Mountain Coffee plunged 46% after it lowered its earnings outlook. European Central Bank left rates at 1% and ECB did not discuss rate cut at its meeting.[/R]

U.S. indexes turned lower after initial weekly jobless claims fell 27,000 to one-month low 365,000 and worker productivity decreased in the first quarter.

Market sentiment was overshadowed by the latest indication that the service sector is growing at a slower pace in April. The index of non-manufacturing index published by the Institute of Supply Management declined to 53.5 in March from 56 in March.

In merger news, Novartis agreed to acquire Fougera Pharmaceuticals for $1.525 billion.

On the earnings front, Visa net soared 47% and American Tower first quarter net surged 141% and raise earnings outlook. General Motors first quarter net tumbled 69% and lifted full year view. Teradata first quarter net soared 40%. Viacom second quarter net surged 56% to $585 million.

Green Mountain Coffee plunged 46% after it lowered its annual earnings estimate between $2.40 and $2.50 a share on full year revenues between $3.8 billion and $4 billion. The company earlier had estimated earnings per share between $2.55 and $2.65.

The stock plunged after it also guided that current quarter earnings per share are likely to be between 48 cents and 53 cents on revenues between $881 million and $897 million compared average analyst estimate of earnings of 71 cents a share and revenues of $1.05 billion.

The European indexes gained and Spain completed bond auction at a higher borrowing cost and on strong earnings reports. European Central Bank held rates firm at 1% after a meeting held in Barcelona, Spain.

The rate decision was widely expected and the euro turned lower after the ECP President Mario Draghi said at a press conference that the central bank did not discuss the rate cut at the meeting. He also added that policy makers still see monetary policy as “accommodative” and “nobody would argue” that liquidity is not abundant.

BMW quarterly net rose 18% on strong Asia sales.

The euro area producer price index rose less than estimated in March. Hungarian trade surplus increased in February and Belgian economy expanded in the first quarter.

The UK indexes advanced and the economic growth outlook was cut for the current year. The UK home prices fell unexpectedly and service sector activity eased in April. BG Group signed a memorandum of understanding to sell Comgás stake for $1.8 billion.

Australian stocks ended lower after commodities eased in international markets. Westpac said first half net declined 25% on the rising costs of bad debts and passed on only 32 basis points of the 50 basis points rate cut. Harvey Norman reported weak results.

Commodities, Bonds and Currencies

The yields on 10-year U.S. bond decreased to 1.92% and 30-year U.S. bond edged lower to 3.11%.

The U.S. dollar edged lower to $1.314 to one euro and inched lower against the Japanese yen to 80.32 yen.

Immediate delivery futures of Texas crude oil decreased $2.65 to $102.54 a barrel and Brent crude futures fell $2.04 to $116.18.

In New York trading, futures of natural gas increased 0.1 cents to $2.35 per mbtu and gasoline price fell 2.22 cents to 305.35 cents a gallon.

In metals trading, copper fell 5.4 cents to $3.73 per pound, gold fell $21.10 to $1,632.90 per ounce and silver decreased 59 cent to $30.03.