NYSE falls after disappointing service industry report: Morning market insights

The New York Stock Exchange fell overnight after a disappointing service industry report in the world’s biggest economy. The US labour department reported Americans filing first-time claims for unemployment insurance fell to 365,000 during the week ending April 28. The 27,000-person decline was the largest weekly drop since early May 2011.

The US Institute for Supply Management (ISM) this morning reported a 2.5-point decline in its non-manufacturing business purchasing managers index (PMI), falling to 53.5% in April. A reading above 50% still indicates expansion, but the growth was smaller than the market had expected.

“It’s all about jobs right now,” Kim Forrest, senior equity analyst at Fort Pitt Capital Group told CNN Money. “The better than expected jobless claims number gave the market some hope for tomorrow, but the ISM Service index took that hope away.”

All 10 industry sectors in the S&P 500 finished down, with energy and material stocks posting the biggest declines as commodity prices fell.

The S&P500 Index was down 0.77% to 1391.57.

The Dow Jones Industrial Average was also down 0.47% or 61.98 points to 13206.60.

The NASDAQ Index fell 1.16% or 35.55 points to 3024.30.

“It’s a bump in the road,” Jeffrey Saut, chief investment strategist at Raymond James & Associates in St. Petersburg, Florida told Bloomberg. His firm oversees more than $300 billion.

“The economic data has turned softer. I wouldn’t be surprised to see the jobs report tomorrow disappoint. All that will do is allow the market to work off its over-bought condition.”

Tonight (AEST time) the US Government will release monthly job figures and the unemployment rate for April. Analysts expect no change from 8.2%. Investors around the world will watch this announcement with interest.

“The Federal Reserve will look at the April and May jobs number very closely to decide whether it needs to take further action or can sit back and do nothing,” Forrest told CNN Money. “Part of the reason we’ve seen a small pullback in stocks recently is because it’s still unclear what the Fed will do in June.”

The West Texas Intermediate (WTI) oil price was down 2.55% to $US102.54 a barrel overnight.

Gold was also down overnight 1.16% to be trading at $US1634.80 an ounce.

The Australian dollar was slightly up overnight as markets stabilised, buying $US1.0267 at 8am AEST.

Europe

European sharemarkets were mixed overnight after the European central bank (ECB) kept its interest rate at a record low of 1% today, as expected by analysts. Stocks erased gains after European Central Bank President Mario Draghi said policymakers didn’t even discuss lowering interest rates.

Speaking at a press conference in Barcelona he said the central bankers did not even talk about cutting rates. The ECB still expects a gradual economic recovery this year, despite “downside risks” prevailing and the economic outlook has become “more uncertain,” Draghi said.

“The ECB was the main focus for many today,” said Ioan Smith, a strategist at Knight Capital Europe in London. “The hope would have been for some sort of quick fix, but he said nothing that suggested they would change their view. The ECB rate path appears to be firmly on hold for the foreseeable future.”

The London FTSE 100 closed up overnight 0.15% to 5766.55, while the German DAX was down 0.24% or 16.33 points to 6694.24.

The European Stoxx50 index was also down 0.14% to 2287.10.