4:00 PM New York – U.S. stocks turned lower as global economic conditions weaken. The latest economic indicators in German, euro zone and in China indicated a slowdown in manufacturing and service sector and falling confidence. UK recession was deeper than previously estimated. Oil rebounded and dollar gained ground.
U.S. trading sentiment was weighed down by the rising bond stress in the peripheral euro zone and ongoing political turmoil in Greece and manufacturing slowdown in China.
U.S. weekly jobless claims fell 2,000 to 370,000 last week and durable goods orders rose 0.2% in April.
In corporate news, General Mills agreed to acquire Brazilian food maker Yoki and Hewlett Packard Co reported quarterly earnings that matched expectations and investors supported restructuring that will cut 27,000 jobs.
Costco third quarter net soared 19% to $386 million but Heinz fourth quarter net plunged 22% to $175.3 million. HP second quarter net plunged 31% to $1.6 billion and announced a layoff of 27,000. NetApp offered a cautious outlook. Tiffany first quarter net was lower than expected.
) initial public offering after much fanfare and market buzz is turning out to be a nightmare for individual investors and online brokers and market makers.
At least three regulatory agencies are looking at the now botched IPO and Knight Capital is likely to demand several millions of dollars in compensation for trading losses from the Nasdaq where the company is listed.
E*Trade, Fidelity Investments and Charles Schwab are reporting problems with unsettled accounts after a week when Facebook began trading and retail investors are demanding compensation for losses.
Separately, a senate panel is interested in finding out the role of analysts during the marketing of the offering by two lead underwriters Goldman Sachs and Morgan Stanley.
European indexes rebounded as leaders failed to agree on a plan to revive growth in the region and investors hunted for bargains. German business confidence fell more than estimated in May and manufacturing and services sector shrank.
The UK economic contraction in the first quarter was revised to 0.3% from 0.2% matching the decline in the fourth quarter to December. The GDP has declined in four of the last six quarters and the latest economic decline has lasted three years and is the third longest recession of the five since the mid-thirties.
Stocks in Japan traded volatile and the yen held its ground as investors focused on the Chinese manufacturing slowdown and demand for credit in China is lower than a year ago. Nikkei is set to decline for the eighth week in a row and has fallen 17% from its peak on March 27.
Rupee in India continued its slide and closed down to a new record low of 55.75 against a dollar. The persistent trade deficit above $100 billion a year and rising current account deficit has dragged the currency by more than 15% in the last seven months as investors seek safety of the dollar and the yen on the rising turmoil in the euro zone.
India is also battling a decline in foreign interest in listed companies and real estate funds as rampant government spending and reckless government borrowing keep inflation at elevated level. Of all currencies in Asia, rupee has lost the most against the dollar in the last two years in a row.
Australian stocks eased as resource prices fell and crude oil declined below $90 a barrel. Qantas plans to add 90,000 new seats capacity in the next two months mostly on the domestic routes. Australian dollar traded at a six month low near 98 U.S. cents as bonds floated in Japan are scheduled for a rollover this week.
Commodities, Bonds and Currencies
The yields on 10-year U.S. bond increased to 1.77% and 30-year U.S. bond edged lower to 2.86%.
The U.S. dollar edged up to $1.255 to one euro and gained against the Japanese yen to 79.54 in New York trading.
Immediate delivery futures of Texas crude oil increased $1.18 to $91.08 a barrel and Brent crude futures rose $1.15 to $106.71. Futures of natural gas decreased 0.03 cents to $2.69 per mbtu and gasoline price increased 0.86 cents to 288.12 cents a gallon.
In metals trading, copper increased 3 cents to $3.42 per pound, gold increased $13.20 to $1,561.70 per ounce and silver added 62 cents to $28.16.