Howard Wheeldon Comments: Weak US Data Drag on Wall Street - FT.com

US stocks fell in early trading on Wednesday after disappointing data on durable goods orders increased investors’ worries about the strength of the US economy.

Less than an hour after the opening bell, the S&P 500 was down 0.6 per cent at 1,045.83, the Dow Jones Industrial Average had lost 0.4 per cent to 10,003.07 and the Nasdaq was 0.5 per cent lower at 2,112.49.

Before the bell, S&P 500 futures were down after orders for durable goods fell short of economists’ estimates, increasing 0.3 per cent in July compared with the average forecast of a 3 per cent rise. Excluding transportation, orders fell 3.8 per cent, the biggest drop since January 2009. The indicator pointed to a slowdown in manufacturing and added to the fears about the pace of the economic recovery which sent the S&P 500 down to seven-week lows on Tuesday.

New home sales meanwhile unexpectedly fell 12.4 per cent to an annualised figure of 276,000 in July compared with economists’ estimates of 330,000. The figure for June was revised down to 315,000. But after an initial drop, markets came off their lows as investors, who were disappointed by existing home sales data on Tuesday, had already pencilled in a weak figure. The S&P 500 Homebuilders index, which has been touted by some analysts this week as a bargain buy, was up 1.5 per cent.

All 10 main sectors of the S&P 500 were down but Howard Wheeldon, senior strategist at BGC Partners, does not think the declines will last.

“Despite a sharp increase in depressing news and despite general confirmation that the US economy has now run out of steam we suspect that when the current downward run in the S&P and Dow has run its course in a few days US markets will begin to be buoyed up again on the back of expectation that both the Fed and government will take action to revive the flagging economy,” Mr Wheeldon said.

Whirlpool, the world’s biggest appliance maker, fell after the weak durable goods data. Shares were down 0.4 per cent to $74.49.

The S&P 500 industrials index, which was down on Tuesday after the weak housing data, was the biggest faller, dropping 1.1 per cent. General Electric fell 1.1 per cent to $14.41, Caterpillar, the world’s biggest maker of earth-moving equipment, lost 1.5 per cent to $64.06 and 3M was down 0.5 per cent to $80.06.

The materials sector was also down, by 0.9 per cent, with Cliffs Natural Resources, the iron producer, falling 2.6 per cent to $56.31, US steel slid 2.3 per cent to $42.54 and AK steel declined 2.8 per cent to $12.01.

Financial companies also suffered with JPMorgan retreating 0.9 per cent to $35.87 and Citigroup losing 1.3 per cent to $3.66.

The important deals of the moment all saw the target’s share price fall in early trading.

3Par said it would start talks with Hewlett-Packard which bid $1.6bn for the data storage company. The company lost 1.9 per cent to $26.52, Hewlett-Packard was flat at $38.39, and Dell, which had entered a lower bid for the company, nudged up 0.4 per cent to $11.63.

US-listed shares in PotashCorp slid slightly, down 1.6 per cent to $146.71 after Marius Kloppers, chief executive of bidder BHP Billiton, said there was only a “small universe” of bidders for the fertiliser producer. US-listed shares in BHP Billiton, which also reported pre-tax profits which had surged nearly 70 per cent, fell 1.1 per cent to $64.70.

Genzyme fell 2 per cent to $66.02 after French pharmaceutical Sanofi-Aventis, which has offered up to $70 a share for the maker of drugs for genetic conditions, said it would not raise its bid beyond $70. US-listed shares in Sanofi-Aventis fell 0.3 per cent to $28.22.

In a quiet day for earnings news, Toll Brothers, the luxury homebuilder, stood out as it beat expectations and swung into profit for the first time in three years. Tax benefits and lower writedowns on land values boosted earnings per share, which came in at 16 cents, above the loss of 14 cents per share predicted by analysts. But the analysts may not have included the tax benefits in their estimates. Shares rose 2.8 per cent to $16.65.

Retailer American Eagle Outfitters surged 7.8 per cent to $13.46 in spite of reporting a fall in same-store sales in the second quarter and saying that discounting had squeezed margins. Earnings per share of 13 cents were in line with expectations but it also forecast weak sales during the important back-to-school season.

VeriFone Systems, the provider of electronic payment technology, rose 3.2 per cent to $23.14 after it raised its full-year earnings forecast to $1.27 a share, above the average estimate of $1.15.

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