U.S. stocks tumbled on Wednesday for a second session as data on U.S. private-sector job growth darkened views of the monthly nonfarm-payrolls report to be released in two days.
“More attention is being brought to the economic data, so everyone can play Nostradamus and guess what the Fed’s next move will be,” Mark Luschini, chief investment strategist at Janney Montgomery Scott, said of ongoing guessing as to when the Federal Reserve would begin tapering its $85 billion in monthly bond purchases.
Stock indexes remained deeply under water after the release of the Fed’s so-called Beige Book, which found the U.S. economy to be still growing at a “modest to moderate” pace.
“In the past few weeks, good news is bad, and bad news is bad, as we started to see talk of the tapering come through,” said Sean Lynch, global investment strategist for Wells Fargo Private Bank.
In its worst session in more than a month, the Dow Jones Industrial Average lost 216.95 points, or 1.4%, to 14,960.59, with Intel Corp. pacing declines that included all of its 30 components.
The S&P 500 index declined 22.48 points, or 1.4%, to 1,608.90, with materials and financials leading losses that included all of its 10 major industry groups. Read a blog: S&P 500 sinks 4% from May highs
A Dell Inc. board panel found Carl Icahn’s takeover bid to be short due to an estimated $3.9 billion funding deficit necessary to pay a proposed dividend and operate the PC maker.
Apple Inc. shares shed 0.9% after the International Trade Commission found the iPhone maker infringed on a Samsung Electronics Co. patent, with Apple facing a possible import ban on some products.
General Motors Co. fell 2.7% after the U.S. Treasury said it would sell 30 million more shares of the car manufacturer’s common stock.
The Nasdaq Composite fell 43.78 points, or 1.3%, to 3,401.48.
For every share rising, four fell on the New York Stock Exchange, where 738 million shares traded. Composite volume approached 3.6 billion.
Gold
and oil prices rose; the U.S. dollar declined and the yield on the 10-year Treasury note (TICKER:10_YEAR) used in determining mortgage rates and other consumer loans fell to 2.087%.
U.S. companies created 135,000 jobs in May, according to ADP Employer Services.
“The market is in the midst of a bit of a correction, so the bias is lower anyway. But with the ADP report being as underwhelming as it was, there is an increasing loss of enthusiasm for equities at the moment,” said Janney Montgomery Scott’s Luschini.
Revised government figures showed productivity rising 0.5% in the January-to-March period, and hourly compensation falling 3.8%. Wednesday’s data came ahead of Friday’s nonfarm-payrolls report, and added credence to the view that a soft labor market would extend the time frame before the Federal Reserve begins tapering its bond purchases.
“The market is playing wait-and-see with Friday’s numbers, but certainly the ADP number that came out showed there is probably moderate downside risk to that May employment number,” said Lynch at Wells Fargo Private Bank.
Another report, this one from the Institute for Supply Management, found a slight acceleration in service-sector activity in May.
Also Wednesday, the Commerce Department reported orders for goods made by U.S. factories rose 1% in April.
A 20-Tuesday-long win streak for the Dow industrials was derailed, with the index falling 76.49 points, or 0.5%, to end at 15,177.54. Fears over when the Federal Reserve will begin to pull back on its bond-buying program weighed on sentiment.
On Tuesday, Fed Bank of Kansas City President Esther George advocated for the Fed to pare back its bond-buying program, and Dallas Fed President Richard Fisher stepped up his criticism of the Fed’s easy-money program.
Strategists at Credit Suisse said Wednesday that they see 15% more upside for stocks. They lifted their S&P 500 year-end target to 1,730 from 1,640 and introduced a new target of 1,900 for the end of 2014. The strategists gave five reasons for staying overweight in equities, including an overly pessimistic view on when the Fed will curb its bond-buying program. Read more on Credit Suisse’s equity call.
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