Stocks off lows as Street digests data; energy leads

U.S. stocks halved early morning losses to trade moderately lower on Wednesday as investors eyed softness in economic data ahead of Friday’s important jobs report.

“The economic data was what pushed markets down to start with,” said Paul Nolte, portfolio manager at Kingsview Asset Management. He noted that weak reports would likely keep the Federal Reserve from raising interest rates soon.

“At some point bad news will be bad news,” he said, “but right now the day of reckoning will be pushed out.”

“Based on (the Fed’s) comments and data I don’t think they’ll be aggressively advancing that Fed funds rate,” said Tim Dreiling, senior portfolio manager at U.S. Bank Wealth Management. “This has to be one of the most telegraphved Fed moves ever. They’ve spent an enormous amount of time prepping us for something. But again we’re going to watch the data.”

The Dow Jones industrial average fell more than 150 points soon after the open before trading off about 60 points, as Merck and Boeing led decliners. The other indices declined about half a percent.

Higher oil prices helped the energy sector gain about 0.70 percent to lead advancers in the S&P 500.

“Most important is the weaker economic news that we got,” said Peter Cardillo, chief market economist at Rockwell Global Capital. “Obviously supporting the fact that we’re headed to a very poor or very ugly earnings season in the first quarter.”

He also pointed to overall weakness in global economic data as weighing on U.S. profits. China’s Purchasing Managers’ Index (PMI) was still tepid despite rising to 50.1 in March from February’s 49.9. The reading was a touch above the 50-mark that that separates growth from contraction.

“We can’t sustain 3 to 3.5 percent without the help of Asia and Europe,” Cardillo said.

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“It’s hard to see how the U.S. is going to raise rates in the face of global weakness,” Kingsview’s Nolte said. “We only raise rates because we can and it could be a ‘one and done.'”

Futures continued to point mildly lower after the morning’s ADP employment report for March showed an increase of 189,000 in monthly private payrolls, below expectations of a modest rise to around 225,000.

“It was a little weaker than I would have liked to see and what we expected. Certainly sets up for Friday’s number to disappoint,” said Mark Luschini, chief investment strategist at Janney Montgomery Scott. “When you have full valuations the market demands good news.”

The U.S. 10-year Treasury yield extended declines to trade as low as 1.86 percent. The U.S. dollar traded flat with the euro near $1.08.

The ISM for March posted 51.5, the weakest level on this indicator since last May. Construction spending fell 0.1 percent in February, for a second straight month of decline.

Growth in the U.S. manufacturing sector rose to a five-month high in March as output and employment gained. Markit said its final U.S. Manufacturing Purchasing Managers’ Index rose to 55.7 in March from 55.1 in February.

“The market is going to be in a trading range until Friday’s number and we start earnings season,” said Peter Boockvar, chief market analyst at The Lindsey Group. He noted that the last two days’ swings have kept the S&P 500 within the 2,040 and 2,120 range.

“If we break below (the 2,035 or 2,040) level perhaps the decline we’ve seen over the last few days could worsen before we see employment data,” Cardillo said.

Friday’s monthly employment report is expected to show another increase in nonfarm payrolls of around 250,000 in March. The unemployment rate is seen unchanged, at a more than six-and-a-half-year low of 5.5 percent.

In an encouraging sign that the housing market is picking up with the onset of spring, weekly mortgage application volume increased 4.6 percent on a seasonally adjusted basis, the Mortgage Bankers Association (MBA) said.

Monthly auto sales come out throughout the day, with expectations of an increase to 16.9 million from 16.2 million.

Ford reported a less-than-expected decline of 3.4 percent for March. Chrysler sales increased 1.7 percent, about one percent below expectations. General Motors reported a greater-than-expected decline of 2.4 percent. Toyota‘s U.S. sales beat estimates slightly, showing growth of 4.9 percent.

Investors are also preparing for a shorter week due to the Easter vacation; stock markets are also closed for Good Friday this week and bond markets close early.

GoDaddy began trading Wednesday morning at $26.15 a share under the symbol “GDDY.” The website hosting service announced late on Tuesday that its initial public offering will price at $20 per share, valuing the company about $4.5 billion.

European traded higher on Wednesday as fresh economic reports continued to show growth in the euro zone.

U.S. stocks closed lower on Tuesday, giving back most of Monday’s major gains, as investors eyed mixed economic data and the end of the first quarter.

Symbol
Name
Price
Change
%Change
DJIA Dow Jones Industrial Average 17714.50
-61.62 -0.35%
S&P 500 S&P 500 Index 2061.94
-5.95 -0.29%
NASDAQ Nasdaq Composite Index 4878.66
-22.22 -0.45%

Oil futures extended gains following the weekly inventory report that showed an increase of 4.8 million barrels. Investors also eyed extended talks between Iran and six world powers. A last-minute deal over Iran’s nuclear program could allow more Iranian crude oil into world markets.

Brent crude traded just above $55 a barrel on Wednesday, while U.S. crude traded near $48 a barrel.

“We’ve got a market that’s overlooking the deadline miss,” said Art Hogan, chief market strategist at Wunderlich Securities.

In continued remarks from central bank policymakers, Atlanta Federal Reserve bank president Dennis Lockhart said on Wednesday that the United States remains on track for a likely interest rate hike in the June to September period, with a weak first quarter likely to give way to stronger growth.

Amazon has unveiled a WiFi connected device called a “Dash Button,” allowing consumers to order products from brands like Dash, Huggies, and Gillette merely by pressing the button. The offer is only open to Prime members who receive an email invitation.

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Simon Property withdrew its buyout offer of $95.50 a share for Macerich after the rival mall operator’s board decided not to hold discussions on the offer.

The Dow Jones Industrial Average traded down 183 points, or 1.05 percent, at 17,589, with Merck falling 2 percent to lead all blue chips lower.

The S&P 500 traded down 20 points, or 0.94 percent, at 2,048, with healthcare the greatest of eight declining sectors and energy leading advancers.

The Nasdaq traded down 55 points, or 1.13 percent, at 4,895.

The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, traded near 16.

Eight shares declined for every five advancers on the New York Stock Exchange, with an exchange volume of 114 million and a composite volume of 425 million in morning trade.

Crude oil futures gained 39 cents to $47.98 a barrel on the New York Mercantile Exchange. Gold futures rose $9.80 to $1,192.90 an ounce just before 10 a.m.

Reuters and CNBC’s Peter Schacknow contributed to this report.

On tap this week:

Wednesday

Vehicle sales

Thursday

Earnings: CarMax, Micron

8:30 am: Initial claims

8:30 am: International trade

10:00 am: Factory orders

Friday

Good Friday holiday

Stock and bond markets closed

Futures markets open holiday schedule

8:30 am: Employment

8:30 am: Minneapolis Fed President Narayana welcoming remarks, community development conference

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