Wall Street saw a moderate dip at the start of the trading day, as disappointing industrial production figures encouraged investors to take profits.
An official government report released this afternoon revealed that US industrial output rose by a meagre 0.1% in October, trailing Bloomberg’s expectations for a 0.4% increase and the prior month’s 0.6% gain.
The weaker-than-expected industrial output figures were mainly attributable to a decline in auto manufacturing, which fell 1.7% last month. Automakers scaled back on production following the expiry of the government’s cash-for-clunkers incentive programme.
Elevated unemployment rates are, perhaps, another logical reason underpinning the sector’s decision to reduce output. On a positive note, however, the report showed capacity utilisation improving to 70.7% in October from 70.5% the prior month.
The disappointing data, along with Dollar-support remarks from the Federal Reserve chairman Ben Bernanke last night, helped add to the rebound in the US Dollar this afternoon, which exerted some pressure on commodities and resource shares.
Freeport-McMoRan Copper & Gold retreated 1.6% to $83.15, while Newmont Mining declined 1.4% to $51.68 following a slight retreat in the price of metals.
By around 3.35pm (London time), the Dow Jones Industrial Average was trading 20.63 points (-0.20%) lower at 10386.33, while the broader S&P 500 was 3.49 points (-0.31%) below its previous close at 1105.81. The Nasdaq, meanwhile, was down 4.97 points (-0.27%) at 1802.59.
Shares of Home Depot, the biggest US home improvement chain, slumped 4.4% to $26.42, while discount retailer Target Corp retreated 3.3% to $48.64 this afternoon. Investors sold shares in both companies, despite reporting quarterly earnings that exceeded consensus expectations, after saying that their operating environment may become more challenging.
A few companies managed to buck the negative trend, however. Exxon Mobil, the world’s biggest oil company, managed to gain 0.7% to $74.92 after Barclays upgraded the company from ‘equal-weight’ to ‘overweight’ and upped its target price to $92 a share. [1]
Biotechnology firm Genzyme was also in favour, up 2.4% to $50.68 after billionaire investor Carl Icahn disclosed that his hedge-fund had bought a $72 million stake in the company during the third quarter.
Poniard Pharmaceuticals, another bio-tech firm which plunged nearly 76% yesterday, rebounded by 11% to $2.03 a share today. Its shares were literally crushed yesterday after its lead lung cancer therapy drug Picoplatin failed a pivotal phase 3 trial.
Zoom Technologies, a maker of equipment for connecting to the Internet, surged 18% to $9.46 after upping its 2009 sales forecast, saying it expects revenue of at least $185 million.
Source: [1] Bloomberg News (17 November 2009)
By Anthony Grech, Research Analyst, IG Index.
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