European Commission lowers its GDP forecast for the region
The U.S. stock market finished mostly lower on Tuesday, 04 November 2014, as steep losses in energy companies' stocks weighed on the main benchmark. The major averages ended the Tuesday session on a mixed note. Stocks were pressured from the start, but the early weakness could be traced back to Europe where the European Commission lowered its GDP forecast for the region. The Dow Jones Industrial Average swung between small gains and losses, but managed to eke out a gain by the end.
The Dow Jones Industrial Average gained 17.50 points, or 0.1%, to 17,383.84. The Nasdaq Composite shed 15.27 points, or 0.3%, to 4,623.64. The S&P 500 finished 5.71 points, or 0.3%, lower at 2,021.10.
The significant weakness in energy kept the market under pressure while other cyclical groups were mixed. Financials, industrials and technology displayed relative strength while consumer discretionary and materials sectors lagged.
Markets have been hobbled by combination of worries about oil and concerns about global growth, namely in Europe.
Gross domestic product in the 18-nation region will rise 0.8% this year and 1.1% in 2015, down from projections for 1.2% and 1.7% in May, the executive arm of the EU said today. The Commission cited the Russia-Ukraine tensions as a major contributor to the slowing EU growth the past few months. The EU also reduced its growth estimates for Germany, the world's third-biggest copper consumer. China is the top user, followed by the U.S.
The other feature Tuesday was Japan's Nikkei stock index hitting a seven-year high. The Nikkei has rallied over 7% since last Friday, in the aftermath of a new batch of monetary stimulus from the Bank of Japan. The Japanese yen has slumped against its world rivals following the BOJ move on Friday.
There are two big economic data points this week: the monthly meeting of the European Central Bank on Thursday and the U.S. employment situation report on Friday. Recent dour economic data coming out of the EU, and Japan's fresh monetary stimulus last week, suggest the European Central Bank will move to enact more monetary stimulus sooner rather than later.
Economic data at Wall Street was limited to the trade deficit and factory orders. The September trade deficit widened to $43.00 billion from a downwardly revised $40.00 billion (from $40.10 billion) while the consensus expected the deficit to come in at $40.20 billion. According to the advance estimate of Q3 2014 GDP, the BEA assumed that the trade deficit narrowed to roughly $38 billion in September. The upward surprise should result in a downward revision to third quarter GDP in the second estimate The goods deficit increased by $2.40 billion in September to $62.70 billion while the services surplus fell to $19.60 billion from $20.20 billion.
Separately, manufacturing orders declined 0.6% in September after falling an upwardly revised 10.0% (from -10.1%), while the consensus expected a decline of 0.5%. Much of the decline in durable goods demand resulted from a 14.7% decline in aircraft orders. Excluding transportation, durable goods orders slipped 0.1% in September.
Bullion prices ended the U.S. day session modestly lower at Comex on Tuesday, 04 November 2014. Gold extended its losing streak to a fifth session on Tuesday as sellers continued to trim their positions due to expectations of further strength in the U.S. A day earlier, gold continued last week's brutal finish, as the surprise stimulus move in Japan continued to provide a tailwind for the dollar. Shrinking demand for the metal in China also has dogged prices.dollar.
Gold for December delivery fell $2.10 to settle at $1,167.70 an ounce. December silver contract lost 1.5%, or 25 cents, to $15.95 an ounce.
Crude-oil prices finished at their lowest in three years on Tuesday, 04 November 2014 at Nymex, struggling in the aftermath of Saudi Arabia's decision to alter oil prices sold to U.S. and Asian buyers. Saudi Arabia's move on Monday was viewed as a way to keep itself competitive amid tanking oil prices and a threat to U.S. domestic producers.
Light, sweet crude futures for delivery in December fell $1.59, or 2%, to settle at $77. 19 a barrel on the New York Mercantile Exchange. That was the lowest settlement for a front-month contract since 4 October, 2011. Oil has ended lower for four straight sessions, down 6.1% over the period.
Treasuries held intraday gains, but the 10-yr note returned to unchanged by the end of the session (2.33%). The long bond, meanwhile, ended in the green to lower its yield two basis points to 3.05%.
Participation was ahead of average with roughly 810 million shares changing hands at the NYSE floor.
Tomorrow, the weekly MBA Mortgage Index will be released at 7:00 ET while the October ADP Employment Change report (consensus 220K) will cross the wires at 8:15 ET. The day's data will be topped off with the 10:00 ET release of the ISM Services Index for October (consensus 58.0).
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