US Market Trading News Update

Posted on | September 25, 2009 |

Wall Street fluctuated between gains and losses, as investors digested a medley of macroeconomic data.

The Commerce Department today unveiled a surprise 2.4% slump in orders for durable goods, after demand for aircraft plunged by 42% in August. The outcome was worse than Bloomberg’s median forecast of a 0.4% increase.

Excluding transportation, bookings for goods meant to last for more than three years were unchanged in August. This compares with Bloomberg’s expectations for a 1% increase. In the meantime, automobile orders rose 0.4% last month after gaining 1.6% the prior month.

‘We expect capital spending during this economic recovery to underperform,’ wrote Jan Hatzius of Goldman Sachs Group, in a note to clients before the report. ‘Few businesses will step up capital spending sharply unless they see a meaningful improvement in end demand.’ [1]

In the meantime, a separate report released today revealed that new home sales rose by a weaker-than-expected 0.7% in August, bringing the annual rate to 429,000. This compares with Bloomberg’s expectations for a 1.6% rise to 440,000.

Offering some relief was the University of Michigan consumer sentiment index, however, which rose to a reading of 73.5 this month, indicating that consumers remain upbeat about current economic conditions and are likely to continue spending. Perhaps recent evidence pointing to a deceleration in the pace of US job losses contributed to the rise in morale.

By 3.30pm (London time), the Dow Jones Industrial Average was 8.99 points (+0.09%) higher at 9716.43 and the broader S&P 500 Index was 0.43 points (+0.09%) above its previous close at 1051.21. The Nasdaq was still trading in negative terrain, however, down 3.10 points (-0.18%) to 1706.66.

BlackBerry maker Research in Motion was in the spotlight today after unveiling a disappointing outlook; its share price tumbled 15% to $70.58 after it reported that current quarter revenue will come in between $3.6 billion and $3.85 billion, missing Bloomberg’s average analyst estimate of $3.91 billion. Price cutting was responsible for the decline in sales.

In the meantime, PC maker Hewlett Packard yesterday announced that it saw overall IT spending coming back next year and forecast a ‘modest growth’ in sales for 2010. The company said it expects sales in the fiscal year ending October 2010 are likely to come in marginally higher, between $117 billion to 118 billion. This was roughly in line with Bloomberg’s estimates. HP’s shares eased 0.54% to $46.62.

Bucking the trend were shares of Sara Lee Corp, which jumped 5.3% to $11.10 after revealing that Unilever is willing to pay €1.275 billion for its personal care business. The US firm said it intends to use the proceeds to invest in its core businesses and repurchase stock.

Ford Motors was also in demand today, with its shares edging 0.8% higher to $7.39 after saying it plans to return to profitability in 2011.

The G-20 concludes its two-day meeting today. President Obama is expected to say that the G-7 meeting will be permanently replaced by the G-20, suggesting world leaders are aiming at further global coordination. The President and his counterparts are also poised to bring up a proposal to curb banking bonuses in order to limit excessive risk taking. G-20 members may also pledge to continue providing stimulus programmes, at least until economic activity becomes more robust.

[1] Source: Bloomberg News (25 September 2009)

By Anthony Grech, Research Analyst, IG Index.

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