GLOBAL MARKETS-World stocks ease as US Fed stimulus hopes dim

NEW YORK: Global stocks retreated on Thursday as expectations dimmed
for new stimulus from the Federal Reserve and data indicated an
economic slowdown in Europe and China, while the euro rose after
sources said Spain was in talks over conditions for aid to reduce its
borrowing costs. Three sources said the favored option for Spain is for
an existing rescue fund, the European Financial Stability Facility, to
purchase Spanish debt at primary auctions while the European Central Bank would intervene in the secondary market to lower yields.
Spain
has not, however, made a final decision to request a bailout, the
sources said, and no specific figure for aid has been discussed, one of
the sources told Reuters. The euro rallied to a seven-week high against
the dollar, up 0.3 percent at $1.2563, while the U.S. dollar index was
down 0.2 percent at 81.366. Concern over the outlook for the global
economy sapped investor sentiment as did comments on Thursday from
James Bullard, president of the Federal Reserve Bank of St. Louis.
Minutes
from the latest Federal Reserve meeting released on Wednesday indicated
the U.S. central bank might be ready for another round of monetary
stimulus, or quantitative easing. But Bullard, a non-voting member of
the policy-making Federal Open Market Committee, said on CNBC
television that U.S. data has been somewhat better since the July
31-Aug. 1 meeting and the minutes were "a bit stale." "There could be a
tiny bit of steam coming out of the QE3 balloon," said Jack de Gan,
chief investment officer at Harbor Advisory Corp in Portsmouth, New Hampshire.
The Dow Jones industrial average closed down 115.30 points, or 0.88 percent, at 13,057.46.
The Standard & Poor's 500 Index slid 11.41 points, or 0.81 percent, at 1,402.08.
The Nasdaq Composite Index fell 20.27 points, or 0.66 percent, at 3,053.40.
In Europe, the FTSEurofirst 300 of top regional shares closed down 0.6 percent at 1,089.13.
Business
activity data showed a downturn was spreading further throughout the
euro zone, with the weakness that began among the smaller, southern
states increasingly taking root in core economies such as Germany. The
Purchasing Managers' Index survey from Markit suggested that the euro
zone was destined to return to recession, as the poll notched up a
seventh month of contraction.
In addition, Chinese manufacturing
PMI data hit the lowest levels since November as new export orders
slumped and the stock of unsold goods rose.
U.S. data was mixed.
Growth in the U.S. manufacturing sector picked up in August, a sign the
economy is resisting the global economic chill, although a rise in new
jobless claims last week pointed to a still-sluggish labor market.
U.S.
government debt prices rose on the view more stimulus was in the offing
from the Federal Reserve, despite Bullard's comments. The weaker
Chinese factory data and worries about Greek and Spanish finances also
spurred safe-haven bids for bonds.
The benchmark 10-year U.S.
Treasury note was up 7/32 in price to yield 1.6711 percent. U.S. crude
futures fell and North Sea Brent pared gains as the revived hopes for
more Fed stimulus faded and doubts about Europe's ability to address
its debt crisis crept back in focus.
Brent crude futures settled up 10 cents at $115.01 a barrel after trading much of the day about $1 higher.
U.S. light sweet crude oil fell 99 cents to settle at $96.27 a barrel. - Reuters
Wall Street falls as Fed doubts knock equities
NEW
YORK: Stocks fell on Thursday as expectations for quick stimulus action
from the Federal Reserve faded and Chinese and euro zone data pointed
to a stalling global economy.
Each of the 10 major S&P
sectors finished in negative territory, with the economically sensitive
materials sector the worst performer, down 1.7 percent.
A slump
in Hewlett-Packard shares weighed on the technology sector, but the
S&P 500 stayed above a support level at 1,400, which is seen as a
positive sign.
Minutes published from the latest Federal Reserve
meeting indicated the central bank might be ready for another round of
stimulus for the economy, supporting equities on Wednesday. Investors
speculated another round of quantitative easing by the Fed was a
possibility.
However, St. Louis Fed President James Bullard,
a non-voting member of the Federal Open Market Committee, said on CNBC
that U.S. data has been somewhat better since the July 31-August 1 Fed
meeting and the minutes were "a bit stale.
"You can definitely correlate (the decline) with Bullard's comments this morning trying to temper expectations," said Seth Setrakian, co-head of US equities at First New York Securities in New York.
"Is
this an appropriate move? Why not? We've had a rally on expectations
that things are going to happen, not because things are getting better."
The
Dow Jones industrial average <.DJI> dropped 115.30 points, or
0.88 percent, to 13,057.46. The Standard & Poor's 500 Index lost
11.41 points, or 0.81 percent, to 1,402.08.
The Nasdaq Composite Index fell 20.27 points, or 0.66 percent, to 3,053.40.
The
S&P 500 is up nearly 10 percent since June 1 after hitting a
four-year high earlier this week. However, recent losses have put the
benchmark S&P 500 index on pace for its first weekly drop in seven
as the rally appeared to be losing steam.
Fed Chairman Ben Bernanke
in the past has used annual conferences in Jackson Hole, Wyoming, to
signal publicly the Fed's intentions, but investors this time may be
disappointed.
"What they said (in the minutes) was a little
while ago and some of the data has actually been a little bit better
recently, so I don't think QE is a foregone conclusion at all," said Doug Foreman, director of equities at Kayne Anderson Rudnick Investment Management, an Affiliated Manager of Virtus Investment Partners in Los Angeles, California.
This year's Jackson Hole conference takes place at the end of the month.
World business surveys painted a picture of economic malaise from Beijing to Berlin.
The
HSBC Flash China manufacturing purchasing managers index (PMI) - a
preliminary reading that provides an early peek at data for August -
fell this month to its lowest level since November.
A German
business survey showed orders from abroad for the country's goods, a
mainstay of its economic strength, fell at the fastest rate in more
than three years.
The number of Americans filing new claims for
jobless benefits unexpectedly rose last week while U.S. manufacturing
improved only slightly in August, worrisome signs for an economy
struggling to create enough jobs.
Sales of new single family homes rose in July, matching April's two-year high.
The reports could be interpreted as evidence the economy is not in need of further stimulus from the Fed.
A
group of brokerages cut their price targets on Hewlett-Packard's stock
after the No. 1 personal computer maker posted an $8.9 billion loss and
cut its earnings outlook for the year, echoing concerns raised by rival
Dell about faltering demand for PCs.
HP
shares fell 8.1 percent to $17.65 as the worst performer on the Dow and
Dell extended recent losses, slipping 3.8 percent at $11.24. The
NYSEArca computer hardware index dropped 1.6 percent.
Contributing
to weakness in the materials sector, shares of U.S. steel producers
fell after a Dahlman Rose analyst downgraded the sector, saying prices
of the metal will decline. U.S. Steel fell 6.9 percent to $21.19.
Big Lots
shares tumbled 20.8 percent to $30.76 as the biggest percentage
decliner on the S&P 500 after the retailer reported a
lower-than-expected quarterly profit and cut its full-year adjusted
earnings forecast.
Volume was light with about 5.23 billion
shares traded on the New York Stock Exchange, NYSE Amex and Nasdaq,
below the daily average of 6.62 billion.
Declining stocks
outnumbered advancing ones on the NYSE by 2,036 to 906, while on the
Nasdaq, decliners beat advancers 1,657 to 800. - Reuters