Traders-Blog.com

The latest economic data, a drop in bond yields and hawkish remarks from a Fed official did little to change investor expectations that interest rates have further to rise. Stocks extended their losses from the previous session’s sharp sell-off and the markets closed lower.

Today, the Dow Jones industrial average closed down 73.72 or 0.7% to 11,131.89, the broader Standard & Poor’s 500 index closed down 7.22 to 1,263.10, and the Nasdaq composite index closed down 12.65 or 0.7% to 2,183.15.

Market breadth was negative. On the New York Stock Exchange, decliners topped advancers by 5 to 3 on volume of 1.7 billion shares. On the Nasdaq, winners beat out losers by a margin of 18 to 11 as 2 billion shares changed hands.

St. Louis Fed president William Poole, in a speech said that the federal funds future’s market has roughly priced in a 50% chance of a rate hike in June. He further added “there is no obvious misalignment of that guess with anything I know that is in the data”. He is essentially saying that the market is providing a reasonable estimate of the chances of a rate hike so be prepared for a 25-basis point rate increase in June.

All investors pay close attention to the latest batch of data to see for signs of a slowing economy. The Conference Board stated that the index of Leading indicators fell 0.1% in April against the expected gain of 0.1%. This supports views that economic growth may not sustain a round of rising prices and wages. While factory activity expanded with the index rising to 14.4 points against the expected 13.5; the prices-paid index, which is a measure of inflation, soared to 55.3 from 29. The Labor Department said new claims for jobless surged last week, a sign of possible slowing in the labor market. Therefore, its evident that the indicators are mixed.

Shares of Sears Holding closed up $17.93 or 13% to $155.89, after posting a quarterly profit compared with a year-ago loss. The retailer’s first-quarter earnings came in well above forecast. Separately, the company agreed to settle one class-action lawsuit for $215 million, resulting in an $85 million pretax payment after insurance.

Burger King’s shares rose 2.9% up $0.69 to $17.69 on its first day as a publicly listed company. The 52-year-old hamburger chain’s $425 million initial public offering is the biggest U.S. restaurant IPO by market value. The company has priced its IPO at $17 a share, at the high end of its previously announced price range.

Shares of Hewlett-Packard closed up $0.39 or 2% to $32.55, boosted by a second analyst upgrade in the wake of strong quarterly results. Morgan Stanley has raised its rating on the computer-hardware and printer maker to equal weight from underweight, on the belief that improving returns on innovation investments will be reflected in enhanced market share and profitability over the long term.

Stock of United Health closed down $1.70 or 3% to $45.19, on news that Omnicare which supplies pharmaceuticals to nursing homes, is suing the health insurer for violating antitrust laws in contract negotiations. United Health has received a subpoena from the U.S. attorney’s office of New York for documents relating to the granting of stock options. Shares of Omnicare closed up $0.29 to $55.24.

Shares of Merck rose 2.3% to $35.13 after the U.S. Food and Drug Administration said Gardasil, a vaccine designed to protect against cervical cancer is safe and effective. Gardasil is designed to protect against four strains of human papillomavirus, or HPV, which can cause cervical cancer and genital warts. In another report, the FDA indicates that its Vioxx painkiller can increase the risk of heart attack after just four months of use.

Crude for June delivery ended up 76 cents at $69.45 a barrel on the New York Mercantile Exchange. Natural-gas futures, fell to their lowest level in 16 months, after inventories data spurred concerns over a potential supply glut.

All the best,
Manuel Jesus-Backus
The Portfolio Crafter