US stocks ended lower for the second straight week on Friday after ricocheting through constantly shifting sentiment and finally plummeting in the last hour of trade.
After fending off more trouble on Tokyo’s bourse and holding steady despite the surge in bond yields, stocks bowed to a sudden bearish turn and sellers reportedly adjusting portfolios on the final day of the month. At the end of the holiday-shortened week, the Standard & Poor’s 500 was down 1.1 percent at 1,630.74.
The Dow Jones Industrial Average lost 1.2 percent at 15,115.57, and the NASDAQ Composite ended only a small fraction lower at 3,455.91.
The caution that began the previous week after the Nikkei 225 Index’s one-day 7.3 percent fall remained constantly present.
Traders and analysts were focused on mixed economic indicators that, together, suggested the economy remains in second gear, and a bond market convinced that growth is strong enough for the US Federal Reserve to begin reeling in quantitative easing.
There was nothing to suggest that the central bank had moved from the stance reiterated by Fed Chairman Ben Bernanke on May 22, when he told the US Congress that the central bank remains wary of trimming its bond-purchase program until it sees several months more of solid data.
Nevertheless, plunging bond prices and strengthening yields played havoc with sentiment.
“This has been very, very choppy. There is no real news; these are trader-oriented markets,” Steven Rosen of Societe Generale said.
“The market remains pretty overbought,” Michael James of Wedbush Securities said.
Despite the gains on Wednesday and Thursday, he said: “There was not a lot of confidence... A fair number of traders were going to sell regardless.”
Core dividend stocks that had served as a solid floor for the market for months sank on the rise in bond yields, with electric utilities as a group losing 3.4 percent and telecom carriers 4.9 percent.
Both sectors were also a drag for the whole of last month, against a 3 percent rise in the S&P 500 for the month.
Fresh acquisition deals grabbed the headlines during the week as cheap cash continued to fuel rising mergers and acquisitions (M&A).
Shuanghui International, which controls China’s largest meat processor, offered US$4.7 billion in cash for US pig and pork giant Smithfield Foods, aiming to lock in a stronger supply of meat products for the Chinese market. Berkshire Hathaway’s energy unit MidAmerican Energy announced it was buying Nevada-based NV Energy for US$5.6 billion, extending its portfolio of power-generation capacity.
The battle over broadband carrier Clearwire intensified. Japan’s Softbank got US national security clearance to buy telecom Sprint Nextel, the 50 percent owner of Clearwire, which itself is seeking to snap up the rest of Clearwire’s shares.
Then Dish Networks laid out a new bid for Clearwire that was sharply higher than Sprint’s — a move that could hurt Softbank’s plan.
Another M&A deal with China links appeared to be heading for trouble: On Friday, insurer AIG group said the Chinese consortium that agreed in December to pay US$4.8 billion for its aircraft leasing firm International Lease Finance Corp had missed a deadline for their down payment.
Also on Friday, Dell’s board re-endorsed the bid by a group led by founder Michael Dell to take the company private — calling it “the best alternative available” while it rejected a counteroffer by corporate raider Carl Icahn.
Analysts forecast more volatility for the coming week, with Japan and European markets still unsettled and the direction of the US economy unclear.
Major data upcoming that could point the way includes auto sales, the ISM manufacturing index and construction spending tomorrow; the ISM services sector index on Wednesday; and job creation and unemployment reports on Friday.
“Given the seasonal tendency for May employment to surprise to the downside, we are forecasting nonfarm payrolls at 125,000 on the headline,” Deutsche Bank analysts said.
“This should keep the unemployment rate steady at 7.5 percent,” they said.
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