A blocked takeover, a weak result from Disney, and a surprisingly poor update from department store giant, Macy’s and higher oil prices conspired to send Wall Street shares lower – reversing the previous day’s 200 plus surge which was the biggest gain in two months.
Gold rose, oil rose on a surprise fall in US stocks, but our market is looking at a 30 point plus loss this morning.
The Aussie dollar traded around 73.80 US cents and the US dollar weakened a touch (which helped commodity prices to ease higher).
The Dow ended 217 points, or 1.2%, lower at 17,711, the S&P 500 lost 1% or 20 point to 2065 and the Nasdaq ended down 49 points, or 1%, at 4,760.
In fact the turnaround on Wall Street was dramatic – it seemed a completely different day with completely different investors. But they were the same characters, only more worried than seemed on Tuesday.
Late on Tuesday a Federal judge had blocked the proposed $US6 billion merger between office products giants, Staples and Office Depot. Both companies will abandoned the deal and not try and pursue a modified transaction.
That hit the shares in both companies and upset sentiment as it is yet another big US merger that has been blocked this year.
But it was retailer Macy’s which released weak earnings and had its credit rating cut into junk territory by Fitch. That crunched retailing shares generally and other consumer facing sectors fell in a 200 point slide on the Dow.
Walt Disney also fell after it unveiled quarterly profits on Tuesday night that missed market estimates for the first time in five years.
In fact every major S&P 500 sector was in the red on the day, with consumer discretionary stocks seeing the biggest losses. Healthcare, financials and consumer staples struggled as well as sentiment changed 180 degrees in a day.
European shares sold off for the first time this weak on a couple of weak results, and a blocked merger in the mobile phone sector.
In commodities, US crude oil prices climbed by 3.5% to $46.23 a barrel as a report showed a surprise drop in American commercial crude stocks.
European stocks registered their first loss in three sessions Wednesday, The Stoxx Europe 600 gave up 0.5% to end on 334.74, France’s CAC 40 dropped 0.5% to 4,316.67, and Germany’s DAX lost 0.7% at 9,975.32. Italy’s FTSE MIB fell 1.3% to 17,698.08, and Spain’s also lost 1.3% at 8,663.90. The U.K’s FTSE 100 rose 0.1% to 6129.
Gold futures rose on Wednesday, rebounding from a nearly two-week low. Gold for June delivery rose $US10.70, or 0.9%, to settle at $US1,275.50 an ounce, while July silver added 22.7 cents, or 1.3%, to $1US7.319 an ounce. Copper settled at $US2.104 a pound, up 1.1 cents, or 0.5%.
Oil futures soared past $US46 a barrel on Wednesday to hit their highest level in more than six months.
The climb was driven by a weekly government report that revealed an unexpected weekly drop in US crude inventories and a ninth straight week of falling domestic production.
June West Texas Intermediate crude futures rose 3.5%, to settle at $US46.23 a barrel in New York. The settlement was the highest since November 4. In London, July Brent crude futures added $US2.08, or 4.6%, to end at $47.60 a barrel.
Prices turned rose after the US Energy Information Administration reported a surprise a 3.4 million-barrel fall in crude-oil supplies last week 6, and a 23,000 barrel a day dip in US oil production to 8.802 million barrels a day.
