US Stocks Extend Losses as Pending Home Sales Drop
New York (Sept 28) US stocks extended losses on Monday after pending home sales unexpectedly declined in August. The S&P 500 was down 1.4%, Dow Jones Industrial Average futures declined 1.1%, and Nasdaq futures fell 1.8%.
Pending home sales fell 1.4% in August as rising prices and fewer properties dampened demand. Economists had expected sales to increase 0.4%. However, the measure still remains 6.1% higher than a year earlier.
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Downbeat sentiment over the Federal Reserve's decision to keep interest rates at crises levels continued into a new week. Benchmark indexes have been under pressure since the Fed opted to leave rates unchanged during its September meeting citing global market volatility as the main reason. The decision rattled investors who feared that the domestic and global economy was in worse shape than initially thought. The S&P 500 fell more than 1% over the past week.
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IMF Managing Director Christine Lagarde, in a newspaper interview, said that a forecast of 3.3% growth in the global economy this year wasn't likely and that next year's 3.8% GDP target was unrealistic. Lagarde noted that slowing growth in emerging economies and China was the culprit.
"Perhaps Janet Yellen has heard us," she added, pointing to the Fed's recent decision to keep interest rates unchanged. "There is no reason to rush."
The central bank will likely hike rates this year, New York Fed President William Dudley said at an event on Monday. However, he said that any decision would not be based on "calendar guidance."
"It depends on the data," he said. A year-end hike is "based on my view of how the economy is likely to evolve."
Consumer spending in the U.S. increased by 0.4% in August, driven by robust car sales and growth in back-to-school purchases. The measure was slightly higher than an expected 0.3% increase. Personals income rose 0.3% in August, according to the Commerce Department, which was slightly weaker than a 0.4% forecast.
Health care stocks were on watch on Monday after the sector closed out its worst week in four years. The industry was under pressure after Democratic presidential candidate Hillary Clinton vowed to address "price gouging" in the industry following the price increase of parasitic infection drug Daraprim from $13.50 to $750 a dose. Gilead Sciences (GILD - Get Report) and Celgene (CELG - Get Report) were extending losses on Monday.
General Electric (GE - Get Report) was down 1.5% after it announced it will move production of gas-powered engines to Canada from Wisconsin after the company failed to access funds from the U.S. Export-Import Bank. Congress let government-run loan agency Ex-Im expire earlier this month.
Apple (AAPL - Get Report) shares were on watch after the company announced Monday it sold more than 13 million new iPhone 6s and iPhone 6s Plus models in the first three days since they were made available over the weekend. This marks a new record for opening weekend sales.
J.C. Penney (JCP - Get Report) added 2% after Sterne Agee analysts upgraded shares to 'buy' from 'neutral.' The firm gave the stock a $13 price target, noting that confidence in a turnaround has increased since analysts met with CEO Marvin Ellison.
Energy Transfer Equity (ETE) agreed to acquire Williams Cos. (WMB) in a deal worth $37.7 billion, or $43.50 a share. The acquisition creates the third-largest energy franchise in North America.
Royal Dutch Shell (RDS.A) was down more than 1% after announcing it will stop offshore drilling in Alaska after a recent drilling exploration yielded disappointing results. The oil giant had spent $7 billion in exploratory drills.
SABMiller (SBMRY) is reportedly pushing Anheuser-Busch (BUD) for a higher takeover price in the range of $106 billion to $111 billion. If approved, the deal would be the largest in the beer industry.
Alcoa (AA) will split into two businesses: an aluminium and mining company and a special metals group. The split is expected to be completed in the second half of 2016 and is part of a long-term strategy rather than activist investor pressure.
Volkswagen (VLKAY) shares were edging higher after a dismal week. The German automaker fell nearly 30% last week after it admitted that more than 11 million diesel vehicles had software that gamed emissions tests.
Source: TheStreet
