U.S. Rate Jitters Resurface After Four Weeks of Rally on Wall Street

Nichole Harper
09 Nov, 2015
New York City

S&P 500 and the Nasdaq indexes declined as much as 1.5% after investors began to digest rate increase possibilities at the end of policy meeting next week. U.S. market indexes are facing headwinds after a 12% surge and recovering from the 10% correction in summer, first in four years.

[R][1:15 PM New York City, New York – S&P 500 and the Nasdaq indexes declined as much as 1.5% after investors began to digest rate increase possibilities at the end of policy meeting next week. U.S. market indexes are facing headwinds after a 12% surge and recovering from the 10% correction in summer, first in four years.[/R]

Market indexes in New York trading dropped more than 1% after four straight weekly gains and investors focus on on-again and off-again rate increase outlook.

However, the case for rate increase at the next Fed meeting was strengthened after latest monthly jobs reported showed economy created 271,000 jobs in October.

The strength of the U.S. labor market is likely to play a key role at the next policy meeting in December with most economists estimating that the rate hike is a real possibility at the conclusion of 2-day meeting.

On Wall Street, Tollbooth Strategy Index dropped 151.66 or 1.4% to 10,937.66.

S&P 500 index slumped 28.74 or 1.4% to 2,070.46 and the Nasdaq Composite Index decreased 75.05 or 1.5% to 5,072.07.

Crude oil in New York fell 35 cents to $43.94 a barrel and gold rose 45 cents to $1,090.25 an ounce.

U.S. Movers

Priceline Group Inc ((PCLN)) plunged 9.2% or $133.48 to $1,316.42 after the online travel services provider reported total revenues in the third-quarter ending in September jumped 9.1% from a year ago to $3.10 billion.

Net income in the quarter soared 13.2% to $1.20 billion or $23.41 per diluted share compared to $1.06 billion or $20.06 per share from the same quarter last year.

European Markets

In the absence of major earnings reports on Monday, investors focused on the outlook for the global economy and news about merger & acquisition.

All the main European markets traded in red territory.

The Organization for Economic Co-operation and Development, or OECD, decreased its global economic forecasts for the second time in three months due to slower growth not only in emerging markets, but also in developed countries like Germany and Japan.

World output is now forecast to grow 2.9% in 2015 and 3.3% in 2016, down from the September estimates of 3% and 3.6%, respectively.

In Europe, growth is expected to slow down to 1.5% in 2015 and to 1.8% in 2016.

The decline in Portuguese shares was most pronounced due to political turmoil. An agreement between leftist parties to establish an alternative government raised concerns among entrepreneurs that political instability would harm investments, financials, and job creation.

In London trading, FTSE 100 index slid 1.68 to 6,352.15, while in Frankfurt the DAX index fell 42.53 or 0.4% to 10,946.95.

In Paris, CAC 40 index slipped 26.27 or 0.5% to 4,958.35.

Continental AG declined 5.1% to €212.65 after the Germany-based tire manufacturer missed earnings expectations, although it raised its annual outlook.

The auto parts maker reported sales in the nine-month period ending in September soared 14% to €29.22 billion.

Net profit surged 16% from a year ago to €2.08 billion and diluted earnings per share jumped to €10.42 from €8.99.

The company’s automotive group sales increased 8.8% to €17.6 billion, while sales in rubber group segment reached €11.7 billion.

Continental forecasted net sales for the year to increase to more than €39 billion.

Germany controlled airline Lufthansa dropped 1.2% to €13.78 euro after the strikes canceled about 1,000 flights, affecting more than 100,000 passengers.

Asian Markets

Nikkei average in Tokyo soared nearly 2% following the stronger-than-expected U.S. jobs report on Friday. Export sensitive stocks and trading companies led the gainers.

Mitsui & Company agreed to acquire 35% stake in Australia based Santos Limited.

NTT Corp estimated fiscal year sales to increase 2.7%. Toshiba plunged 7.5% on weak results.

The Nikkei 225 Stock Average soared 377.14 or 1.9% to 19,642.74 and the broader Topix index jumped 27.38 to 1,590.97.

The yen weakened to 123.48 against a dollar.

Mitsui & Co Ltd jumped 2.3% to 1,540.50 yen after the trading company agreed to acquire 35% stake of Kipper gas and condensate field business from Australia-based oil producer Santos Limited for about 45 billion yen or A$520 million.

Toyo Tire & Rubber Co., Ltd increased 1.8% to 2,671 yen after the tire maker stated net sales in the third-quarter ending in September jumped 4.8% from a year ago to 300.96 billion yen.

Net in the period swung to a loss of 4.31 billion yen compared to profit of 23.51 billion in the same period a year ago.