Caterpillar Job Cut and VW Scandal Set Global Market Decline Tone

Nichole Harper
24 Sep, 2015
New York City

U.S. stocks stayed in the negative territory and investors struggled to find a path from the uncertainty related to ongoing U.S. monetary policy and global economic slowdown. Caterpillar set the tone after announcing a large job cut and lowered sales outlook.

[R]4:25 PM New York City, New York – U.S. stocks stayed in the negative territory and investors struggled to find a path from the uncertainty related to ongoing U.S. monetary policy and global economic slowdown. Caterpillar set the tone after announcing a large job cut and lowered sales outlook.[/R]

Stocks opened sharply lower in New York and in a volatile session market indexes struggled to rebound to flat line.

Ongoing U.S. monetary policy and direction of global economic growth resurfaced after one of the largest U.S. companies Caterpillar lowered its sales outlook and announced a large job cut.

Seasonally adjusted weekly jobless claims rose 3,000 to 267,000 from the previous week’s unrevised claims of 264,000, the U.S. Department of Labor said.

Durable goods orders in August fell 2% to $236.3 billion, the decrease following two consecutive monthly increases and 1.9% increase in July.

Orders excluding transportation declined 5.8% and defense slid 1%, the Department of Commerce reported.

Separately, the department said seasonally adjusted new home sales in August jumped 5.7% to 552,000 from the revised June rate of 522,000 and surged 21.6% from a year ago month to 454,000.

The median sale price of new homes sold in the month was $292,700 and average price was $353,400.

On Wall Street, Tollbooth Strategy Index slipped 112.71 or 1.1% to 10,238.54.

S&P 500 index slumped 20.81 or 1.1% to 1,918.27 and the Nasdaq Composite Index dropped 63.91 or 1.3% to 4,688.55.

Crude oil in New York rose 29 cents to $44.77 a barrel and gold soared $20.90 to $1,152.40 an ounce.

U.S. Movers

Accenture Plc slipped 1.2% or $1.21 to $96.65 after the Ireland-based outsourcing services provider reported revenues in the fourth-quarter ending in August rose 1.1% from a year ago to $8.36 billion.

Net income in the quarter jumped 4% to $788 million or $1.15 per diluted share compared to $760 million or $1.08 from the same quarter last year.

For the fiscal first-quarter, Accenture forecasted net revenues in the range of $7.70 billion to $7.95 billion.

Accenture estimated revenues growth for the year between 5% and 8% and diluted earnings per share in the range of $5.09 to $5.24.

Caterpillar Inc ((CAT)) plummeted 6% or $4.22 to $65.97 after the construction and mining equipment maker lowered revenues forecast for the year by $1 billion to about $48 billion and also lower operating costs of about $1.5 billion.

The company also plans to reduce its workforce by 4,000 to 5,000 by the end of 2016 and by 10,000 through 2018.

European Markets

Markets in Europe extended weekly losses on the growing worries of global slowdown and the impact of widening Volkswagen scandal weighed on German stocks.

In London trading, FTSE 100 index dropped 71.74 or 1.2% to 5,963.15 and in Frankfurt the DAX index decreased 176.48 or 1.8% to 9,435.48.

In Paris, CAC 40 index slumped 72.81 or 1.6% to 4,359.88.

H & M Hennes & Mauritz AB declined 3.2% to SEK300.50 after the Sweden-based retailer reported net sales in the third-quarter ending in August soared 18.6% from a year ago to SEK46.02 billion.

Net profit in the quarter edged up 0.2% from a year ago to SEK5.31 billion compared to SEK5.30 billion and earnings per share rose to SEK3.21 from 3.20.

The company said sales including VAT in the period between September 1 and September 22 jumped by 12% compared to the same period last year.

Ryanair Holdings Plc slumped 3.1% to €13.35 after the Ireland-based low fare airline operator said it plans to return €398 million proceeds from the sale of 29.8% stake in its rival Aer Lingus Group Plc to its shareholders by the end of this year.

As of August, Ryanair has returned about €800 million to shareholders.

Ryanair lifted net profit forecast for the year to between €1.18 billion and €1.23 billion from the previous range between €940 million and €970 million.

Asian Markets

Nikkei average plunged 2.8% after Japanese markets reopened after a 3-day holiday. Weakness in New York and Shanghai were compounded by weakening growth profile in manufacturing sector and falling yen.

Market averages in Tokyo opened lower after a three-day holiday period and caught with international market sentiment in China and in the U.S.

The weak market conditions in Shanghai and in New York drive the sentiment in Tokyo and Nikkei plunged nearly 3%.

Separately, a private survey of manufacturing showed a slowing growth profile in the sector.

The Nikkei Flash Japan Manufacturing Purchasing Managers’ Index declined to 50.9 in September from 51.7 in August when new order growth was at its fastest since January.

New orders growth moderated after export orders declined at the fastest pace in nearly three years.

The Nikkei 225 Stock Average dropped 498.38 or 2.8% to 17,571.83 and the broader Topix index slumped 35.41 or 2.4% to 1,426.97.

The yen strengthened to 119.94 against a dollar.

Automakers led the decliners and Toyota Motor, Nissan, Honda and Suzuki declined between 2% and 4% after investors dumped the sector on the news that Volkswagen manipulated on U.S. diesel vehicle emission tests.

The diesel filter makers Ibiden and NGK Insulators plunged 7%.

Stocks in Mumbai traded sideways as rupee drifted lower and market indexes gained at close.

Road builders were in focus in Mumbai after the government agency awarded more contracts.

Hindustan Construction Co. received contract from National Highways Authority of India for $300 million. Larsen & Toubro plans to sell asset. Ashoka Buildcon won highway project worth $80 million to build Mumbai-JNPT Port Road.

Rupee weakened 18 paisa to 66.15 against one U.S. dollar.

The Sensex Index rose 40.51 or 0.2% to close at 25,863.50. The CNX Nifty added 22.55 or 0.3% to 7,868.50.