While you were sleeping: US services disappoint
Jan 7 (BusinessDesk) – Wall Street dropped after disappointing data for the US services industry illustrated that the road to recovery in the world’s largest economy has some potholes.
The Institute for Supply Management’s non-manufacturing index slid to 53 in December from 53.9 in November, surprising economists, who had called for an acceleration in the rate of growth.
"We think the economy is on track and in recovery mode, and it isn't unusual to see periodic weak reports," David Carter, chief investment officer at Lenox Wealth Advisors in New York, told Reuters. "ISM was a bit weak but the ongoing trend supports an ongoing recovery."
In contrast to the services data, factory orders increased 1.8 percent in November, according to Commerce Department data, which was in line with expectations.
In afternoon trading in New York today, the Dow Jones Industrial Average slid 0.34 percent, while the Standard & Poor’s 500 Index fell 0.29 percent and the Nasdaq Composite Index dropped 0.46 percent.
Declines in shares of DuPont, last 1.3 percent weaker, and Caterpillar, last down 1.2 percent, paced losses in the Dow.
US Treasuries received a boost from the data showing weakness in parts of the American economic recovery. Yields on the benchmark 10-year bond dropped four basis points to 2.97 percent.
The US Senate is expected to approve Janet Yellen as the next Chairman of the Federal Reserve today. Ben Bernanke’s second four-year term expires on January 31.
Shares of Twitter sank, last down 6.1 percent, after Morgan Stanley downgraded its rating on the stock to underweight.
“As competition for online ad dollars intensifies, we guide investors to Google and Facebook, dominant platforms with more attractive risk/reward,” Scott Devitt, an analyst at Morgan Stanley, in a note, according to Bloomberg News. “In our view, success is far from guaranteed at this early stage.”
In Europe, the Stoxx 600 Index ended the session with a 0.2 percent decline from the previous close. The UK’s FTSE 100 finished steady, Germany’s DAX edged 0.1 percent lower, while France’s CAC 40 fell 0.5 percent.
A Reuters survey found that OPEC's oil output fell in December to the lowest since May 2011. OPEC output averaged 29.53 million barrels per day last month, down from 29.64 million barrels per day in November, according to the survey based on shipping data and information from sources at oil companies, OPEC and consultants.
"Supply issues are still in the spotlight," Carsten Fritsch, analyst at Commerzbank, told Reuters. "In terms of Libya, it is too early to say if production levels will stabilise further."