Wall St falls on poor service sector data
US stocks fell yesterday after data showed the vast American services sector unexpectedly shrank in November and investors worried that Friday’s non-farm payrolls report may show the recovery is sluggish.
Stocks sold off going into the close, led by financials, as Bank of America’s massive equity offering spurred concerns that other banks could sell new shares and dilute existing shareholders’ equity. The S&P financial index ended down 2.1 per cent.
However, shares of Bank of America, parent of the largest bank ranked by assets, ended up 0.7 per cent at $15.76 on optimism that its plan to repay $45bn of government bailout money will free the bank from government restrictions, especially on executive pay.
On the data front, the services sector index fell to 48.7, indicating that this huge component of the US economy had experienced contraction last month, according to a report from the Institute for Supply Management.
The ISM data hurt sentiment a day before November’s unemployment figures are released in an even more influential economic report.
“Given ISM today, and given the rally of the last few days, it may be some nervousness ahead of tomorrow’s unemployment number,” said Kurt Brunner, portfolio manager at Swarthmore Group in Philadelphia, in reference to the malaise on Wall Street.
“You’ll probably see some deterioration in the unemployment rate. One would think you’re going to get at least some improvement in the job losses, but it bears being a little cautious.”
Economists polled by Thomson Reuters forecast a drop of 130,000 nonfarm jobs in
November in Friday’s report and an unemployment rate holding steady at 10.2 per cent.
The Dow Jones industrial average dropped 86.53 points, or 0.83 per cent, to end at 10,366.15. The Standard & Poor’s 500 Index slipped 9.32 points, or 0.84 per cent, to close at 1,099.92. The Nasdaq Composite Index fell 11.89 points, or 0.54 per cent, to finish at 2,173.14.
Government data showed the number of US workers filing new claims for unemployment benefits fell last week.