Downbeat European economic news affect the momentum
U.S. stocks ended marginally higher on Wednesday, 06 August 2014, as investors remained cautious in the wake of heightened geopolitical risks and downbeat European economic news. Although stocks finished on a flat note, the early indication suggested the market could be in for a rough day as economic data from the eurozone and domestic corporate news weighed.
The Dow Jones Industrial Average gained 13.87 points, or 0.1%, to 16,443.34. The Nasdaq Composite added 2.22 points to 4,355.05. The S&P 500 ended flat at 1,920.23.
A lack of risk appetite globally pushed prices of safe-haven assets higher. U.S. Treasurys rallied and gold futures jumped above $1,300 per troy ounce, while global equities fell.
There is renewed attention on the Russia-Ukraine crisis at mid-week. Reports said Russian president Putin is getting ready to retaliate with its own sanctions against the West after his country has been slapped with economic sanctions recently.
In other news Wednesday, the yield on the German five-year bond (the Bobl) dropped to a record low Wednesday, at 0.28%, down from 0.33% last month. The record-low German bond yield is another clue of the heightened risk aversion presently in the market place.
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Italy's GDP was reported down 0.2% in the second quarter from the first, and down 0.3% year-on-year. This means Italy's economy has slipped back into recession, which is another bearish clue for the collective European Union economy.
In today's sole economic news, the U.S. trade deficit shrank in June, largely because imports of petroleum fell to the lowest level since late 2010. Reaction to stronger-than-expected economic data over the past few weeks had been generally negative, as investors worry that accelerating growth may force the Federal Reserve to start raising rates sooner than currently anticipated.
Among major stocks under focus, Time Warner shares sank 13% after 21st Century Fox said late Tuesday that it was withdrawing its proposal to buy the company. 21st Century Fox shares rose 2.3%.
Shares of Walgreen sank 14% after the drugstore chain issued 2016 guidance well below Wall Street guidance. The drugstore also said it will keep headquarters in the U.S., news that will disappoint a group of investors trying to persuade the company to relocate its headquarters to tax-friendly Switzerland.
Cognizant Technology Solutions shares plummeted 13% after the information-technology company cut its revenue guidance for the year and projected third-quarter revenue that missed analysts' expectations.
Bullion prices on Wednesday, 06 August 2014 shrugged off its recent weakness and gold moved back above $1,300 as Ukraine fears cast a shadow over the equity markets.
Gold for December delivery rose $22.90, or 1.8%, to $1,308.20 an ounce. September silver gained 19 cents to $20.02 an ounce.
Crude-oil futures ended at a fresh six-month low on Wednesday, 06 August 2014 at Nymex with a boost from a decline in supplies proved short-lived. Crude oil for delivery in September fell 46 cents, or 0.5%, to end at $96.92 a barrel on the New York Mercantile Exchange.
As per EIA, crude-oil supplies fell 1.8 million barrels in the week ended 1 August 2014. Gasoline inventories were down by 4.4 million barrels while distillates stockpiles decreased by 1.8 million barrels. Market had expected crude oil stocks to decline 1.9 million barrels. Gasoline supplies were seen down 700,000 barrels, and distillate supplies were expected to add 1.1 million barrels.
Economic data was limited to the June Trade Deficit and the MBA Mortgage Index:
Tomorrow, weekly initial claims (consensus 308K) will be released at 8:30 ET, while the Consumer Credit report for June (consensus $15.80 billion) will cross the wires at 15:00 ET.
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