Wall Street hit by poor factory data
US STOCKS tumbled yesterday, marking their worst slide in a month after regional manufacturing data dented optimism about the economy’s health and resource shares fell alongside commodity prices.
After a series of signs the economy may be stabilising, investors are looking for more definitive signals of its improving health. Analysts also said a pullback was unsurprising after a three-month rally.
Economists had expected to see slight improvement in the New York Fed’s Empire State index, but the survey showed the factory sector shrank at a much more severe rate in June than the previous month.
Manufacturers’ shares fell, including 3M, which was down 2.8 per cent at $59.31, while Caterpillar shed 4.3 per cent to $36.12.
Oil prices fell from nearly an eight-month high after Russia expressed confidence in the US dollar as the world’s reserve currency, increasing the greenback’s safe-haven appeal. Commodity prices and the dollar have moved inversely of late. Gains in the dollar makes oil more expensive for holders of other currencies.
Chevron fell 2.2 per cent to $71.08. The S&P energy index slid 2.3 per cent. The Dow Jones industrial average fell 187.13 points, or 2.13 per cent, to 8,612.13. The Standard & Poor’s 500 Index lost 22.49 points, or 2.38 per cent, to 923.72. The Nasdaq Composite Index dropped 42.42 points, or 2.28 per cent, to 1,816.38.
While the recent run-up in commodity prices had helped stocks extend their rally, there has also been concern that a surge in oil and other commodities could hamper any budding economic recovery. Higher energy costs are a drag on consumer spending and corporate profits.
In light volume, the indexes racked up their biggest one-day percentage loss since mid-May. But the broad S&P 500 is still up 36.5 per cent from the 12-year closing low of early March.
Sentiment also cooled after Goldman Sachs cut its rating on Wal-Mart Stores to “neutral” from “buy” saying it did not see a lot of positive catalysts to drive shares higher in the near-term as expense pressures persist. Wal-Mart was among the top drags on the blue-chip Dow average. It fell 2.8 per cent to $48.46.