Investors appeared cautious on Wednesday as a disappointing private sector jobs report fuelled concerns about the strength of the economic recovery. Treasury yields fell sharply as investors switched gears, anticipating a fresh round of quantitative easing measures from the Federal Reserve.
Private sector payroll company ADP said employers cut 39000 jobs in September, much higher than expectations. The report, seen as a precursor to today’s monthly U.S. non-farm payrolls report, sent demand for Treasurys soaring as investors sought safety. The yield on the 10-year note dropped to 2.39%, it lowest since January 2009. Expectations that the Fed would buy bonds to infuse liquidity in the system sent the greenback lower against other currencies.
A Labor Department report that showed an unexpected drop in first-time unemployment claims has sent this morning’s stock futures slightly higher. Ahead of the opening bell, the Dow Jones industrial average futures rose 13 points, or 0.1%, to 10,919. S&P 500 futures are up 1 point, or 0.1%, at 1,157, while Nasdaq 100 futures are down about 2 points, or 0.1%, at 2,002.
On Tuesday, all three major indexes had rallied sharply on reports the Japanese Central Bank had unexpectedly decided to slash interest rates amid growth concerns. An upbeat service sector report also boosted stocks on Tuesday.
On Wednesday, the 30-share Dow Jones Industrial Average edged up 23 points to close at 10967.65, its highest level in five months. However, the broader indexes closed with losses. The tech-laden Nasdaq Composite index dropped more than 19 points, or 0.8%, to 2380.66. The S&P’s 500-stock index fell less than a point to 1159.97. On the New York Stock Exchange, declining issues narrowly outpaced advancing issues as less than one billion shares exchanged hands.
Industrial companies such as General Electric (NYSE:GE) and Alcoa (NYSE:AA) led the Dow average’s list of gainers. General Electric rose 2.4% to $16.90 after the company announced that it had agreed to acquire Texas-based Dresser, an energy infrastructure company, for about $3 billion. However, the industrial conglomerate’s $1.2 billion bid for U.K.-based Wellstream Holdings was turned down by the latter. Alcoa’s shares rose 1.9% to $12.37. On the downside, AT&T (NYSE:T) shares dropped 1.1% on a WJS report that Apple (NASDAQ:AAPL) is preparing to launch a “Verizon-ready” (NYSE:VZ) smartphone early next year.
The S&P500 was pulled down by telecommunication (-1.6%) and technology (-0.9%) shares. Basic material (+1.0%) and oil and gas (+0.7%) shares led on the upside.
The sell-off in technology shares came on reports Equinix (NASDAQ:EQIX) lowered its third quarter revenue forecast to a range of $328 million to $330 million, down from its previous view of $335 million to $338 million. The company also slashed its full-year guidance to $1.22 billion from $1.23-$1.4 billion. This morning chip maker Samsung Electric warned of weaker third quarter results due to falling prices for flat screens and televisions.
ALCOA INC (AA): Free Stock Analysis Report
APPLE INC (AAPL): Free Stock Analysis Report
EQUINIX INC (EQIX): Free Stock Analysis Report
GENL ELECTRIC (GE): Free Stock Analysis Report
AT&T INC (T): Free Stock Analysis Report
VERIZON COMM (VZ): Free Stock Analysis Report
Zacks Investment Research
