Us Stocks Profit Downfall Due To Slow Global Growth
Last Monday, U.S. stocks has recorded a fall. This is attributed to the weak economic data from Asia which has raised concerns about a slowdown in global growth and continuing European debt problems and investors hesitations in making big bets ahead of the upcoming earnings season in the United States.
Monday's decline, the third in a row for the S&P 500 index, was also fueled by climbing Spanish and Italian bond yields.
Machinery orders in Japan had dropped at a record pace of 14.8 percent in May, which is far worse than the 3.3 percent forecast, while inflation in China eased to a 29-month low of 2.2 percent in June.
Andrew Wilkinson, chief economic strategist at Miller Tabak & Co in New York, commented that though tame inflation had provided greater opportunities for central banks to fight the slowing economy, there are still many investors who are coming round to the conclusion that too much of the powder has already been used and is damaging hopes for a rebound.
This overseas data came on the heels of the disappointing U.S. jobs report last Friday, which showed non-farm payrolls growth of only 80,000 in June.
Further raising concerns, Italian borrowing costs had continued to rise on Monday while Spanish 10-year yields had also increased past the 7-percent level viewed as unsustainable in the longer-term by many analysts and reflecting doubts over how measures agreed last month to stem the crisis will be implemented.
Alcoa Inc was seen kicking off the earnings season after the closing bell when the aluminum giant had post the expected 5-cent per share profit for the second quarter. Shares slipped 1.8 percent to $8.57.
Corporate outlooks are said to be at their most negative in nearly four years, with companies that have already reported showing lackluster growth. There are nearly two dozen S&P firms who have already cited Europe's woes, which seem to be worsening, as a concern.
According to Jonathan Golub, chief strategist at UBS, "We think 2Q earnings for the S&P 500 will be OK this quarter ... we're calling for a small 2 percent beat. That said, we expect the tone of earnings season to be quite negative"
Investors are already set to closely monitor corporate earnings for signs the euro zone debt crisis has dented profits, especially among multinational companies.
The Dow Jones industrial average was seen to have decreased by 60.85 points, or 0.48 percent, at 12,711.62. The Standard & Poor's 500 Index has also fallen by 4.80 points, or 0.35 percent, at 1,349.88. The Nasdaq Composite Index had also taken a beating of 8.49 points, or down 0.29 percent, at 2,928.84.
Payment processors Visa Inc and MasterCard Inc were downgraded by UBS Investment Research to "sell" from "neutral," citing slower consumer spending in the United States and sluggish global economic growth. Visa shares had seen a decrease of 2.4 percent at $122.23 while MasterCard shares were down 3.5 percent to $426.19.
On a positive note, there was jump of 38 percent to $88.82 seen in Amerigroup Corp after the company agreed to be acquired by rival WellPoint Inc for about $4.46 billon.
WellPoint shares had shown an advance of 3 percent to $61.72, as well as health insurer Wellcare Health Plans Inc, showing a surge of 18 percent to $62.32. The Morgan Stanley healthcare payor index had also climbed 9.3 percent.
Boeing Co had also showed a gain of 0.7 percent to $74.22 as the top boost to the Dow after the company said it made final an airplane order with Air Lease Corp valued at $7.2 billion.
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