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Market Update by Mark Glassman (Author Archive)
Major Indexes Rebound From Earlier Losses
News at a Glance
- Manufacturing Improves: ISM index surprises economists.
- House Music: Pending Home Sales index tops consensus.
- Market Recovers: Equities turn positive on construction, housing.
- Private Sector Slammed: ADP report shows record job loss.
The Lowdown
Some surprising economic data lifted the market out of the doldrums Wednesday.
Stocks turned higher, as optimism over unexpectedly strong numbers in the construction, manufacturing and housing sectors offset weak employment data and the threat of bankruptcy in Detroit. The Dow Jones Industrial Average reversed its early losses to close up 152 points at 7761. The Nasdaq picked up 23 at 1551, and the S&P 500 rose 13 to 811.
Most of the gains came in financials and techs. Capital goods, materials and telecoms also advanced. Health care sagged.
A slew of surprising economic reports drove the market out of the red. Construction spending fell by less than the market had expected. The Institute for Supply Management's manufacturing index rose when economists had projected a fall, and the Pending Home Sales index advanced, offering traders one more piece of evidence in making the case that the housng market had reached a bottom.
The session had begun with an early drop after General Motors (GM) chief executive Frederick "Fritz" Henderson said he would take the firm to bankruptcy court if it was necessary to get the automaker's books in order.
New labor data was of little consolation. The ADP Employment Report, which tracks private payrolls, showed the U.S. lost a record 742,000 jobs from the private sector in March. The broader federal jobs report is scheduled to be released Friday.
In finance, dealmaking suffered during the first quarter. Global M&A volume dropped to $553 billion, 21% below the year-ago period and 11% down from the fourth quarter, The Wall Street Journal reported, citing new data from the research firm Dealogic. U.S. volume was hyperinflated by two mega-mergers in the pharmaceutical industry.
In regulation, President Obama met with British Prime Minister Gordon Brown to discuss new rules for banks. They said the G-20 must agree on common regulations for financial institutions to promote the economic recovery.
World markets were mixed on the idea of more banking restrictions. In Asia, Japan's Nikkei picked up 3.0%, while Hong Kong's Hang Seng dropped 0.4%. In Europe, the U.K.'s FTSE gained 0.8%.
In energy, crude prices widened their losses after a bump in inventories. Oil traded down $1.30 at $48.36 a barrel.
Corporate News
- AIG (AIG) director James Orr, the chairman of the board compensation committee, is the target of a shareholder campaign intended to shake up how the company handles executive pay, The Wall Street Journal reported. Investors are attempting to block Orr's reelection, blaming his negligence for the $165 million in bonuses approved while the firm was near critical condition.
- Honda (HMC) said it plans to make several cost cuts, including slashing its North American vehicle production by 62,000, closing factories for 13 days next month and cutting workers' pay, Reuters reported. Honda is coping with excess inventory at U.S. lots, and executives said the spillover would likely persist until the summer.
- Research In Motion (RIMM) is launching a new online store to sell applications for its BlackBerry smartphones, the firm said. In the mold of the Apple (AAPL) iPhone App Store, BlackBerry App World will allow users to download news, entertainment, gaming, social networking and business applications directly to their phones. RIM predicts roughly 1,000 applications will be added to the store by its partners this week.
The Economy
- Private payrolls lost 742,000 jobs in March, down from a revised February loss of 706,000 jobs, according to the latest ADP Employment Report. The report tracks private payrolls and is used (with varying degrees of success) to handicap the broader federal jobs report, which is scheduled to be released Friday. Economists had predicted private payrolls would shrink by 663,000 jobs in March. REPORT
- Construction spending fell 0.9% in February, slowing from a revised 3.5% decline in January, the Commerce Department said. Economists had predicted spending would dip 1.9% in February. REPORT
- The Institute for Supply Management's Purchasing Managers' Index for the manufacturing sector rose to a March reading of 36.3%, up from a February reading of 35.8%. A reading of less than 50% indicates the sector is contracting. Economists had predicted the index would inch up to a March reading of 36.0%. REPORT
- The Pending Home Sales index rose 2.1% in February, rebounding from a 7.7% decline in January, the National Association of Realtors said. For February, economists had expected no change. SPREADSHEET
- Crude inventories rose by 2.8 million barrels last week, leaving them above the upper limit of the average range for this point in the year, the Energy Department said. REPORT
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