Stocks remained lower despite factory orders in March rebounding at a faster-than-expected pace. Newslook
U.S. stocks fell again Wednesday, as investors grappled with a weaker-than-expected reading on job creation in the private sector last month but good news on the services sector of the economy, extending yesterday’s sell-off that pushed the Dow to a three-week low.
The Dow Jones industrial average ended down 100 points or 0.6%. The broader Standard & Poor’s 500 stock index lost 0.6% . And the technology-dominated Nasdaq composite was down 0.8%, logging its ninth down day in the past 10 trading sessions.
Payroll processor ADP said private employers created 156,00 new jobs in April, far below expectations of close to 200,000. The weak number raised concerns that the April jobs report released Friday by the government might also fall shy of the 200,000 estimate.
But investors got some better economic news later in the morning. The Institute for Supply Management’s April reading on the non-manufacturing part of the economy, or services sector, came in strong at 55.7, topping estimates of 54.8. March factory orders also topped analysts’ expectations, rising 1.1%. The nation’s trade deficit also narrowed in March to $40.4 billion.
Those strong reports reduced some of the angst over slowing growth in the U.S.
Indeed, the three-month stock rally has stalled. The surge in the Dow since the Feb. 11 bottom, which saw the blue chip stock gauge surge 15.6%, has petered out. Since its recent high of 18,096.27 on April 20, the Dow has slid nearly 2%, including a 140-point dive Tuesday that sent it down to 17,750.91 at the close, its lowest level since April 12.Heading into today’s session, the stock market is showing signs of a loss of momentum, and that trend is continuing during the trading session.
Robert Sluymer, a technical analyst at RBC Capital Markets told clients in a note that the market’s current signs of stalling are not that surprising given the big run-up in stock prices since mid-February.
“The price action has been rather choppy to say the least,” Sluymer wrote. “However it should be expected given how short-term indicators were overbought and beginning to unwind and the cliche ‘sell in may’ rhetoric has taken center stage in the media.”
Sluymer is referring to the old Wall Street adage, ‘Sell in May and go away,’ which is a seasonal trading strategy to avoid the market’s worst six-month period, which kicks off in May and ends at the end of September.
David Rosenberg, chief strategist at Gluskin Sheff, says the recent stock market weakness is a sign of more losses to come.
“The entire complexion to this market has changed and all signs now point to a near-term correction,” Rosenberg warned in research note.
Growth fears and overseas news is again weighing on stocks. On Tuesday, investor sentiment was hurt when a key Chinese manufacturing data point for April came in weak, causing growth fears to resurface. The European Union also dialed back its economic growth targets for 2016 and 2017.
A new worry-point for Wall Street is the recent strength in foreign currencies vs. the dollar. The yen is trading at a 18-month high vs.the greenback, which is likely to put further pressure on Japanese exporters and adding to angst over growth. The euro has also been climbing, putting a strain on eurozone firms that sell stuff abroad. The U.S. is also dealing with a stalled economy, with first-quarter GDP coming in below expectations at 0.5%.
Wall Street is also starting to handicap the implications of a presidential race now that Donald Trump appears to be the presumptive nominee for the Republican party and Hillary Clinton continues to maintain a big lead over Bernie Sanders.