Wage wor­ries sink stocks; IBM skids

The Register Citizen (Torrington, CT) - - FRONT PAGE - By Mar­ley Jay

NEW YORK >> U.S. stocks gave up a promis­ing start and fin­ished mostly lower Wed­nes­day as in­vestors con­tin­ued to worry about lag­ging wages and en­ergy com­pa­nies dropped with the price of oil.

Stocks climbed early on as a solid quar­ter from Mor­gan Stan­ley re­vived op­ti­mism about banks, and strong re­sults from auto and in­dus­trial parts dis­trib­u­tor Gen­uine Parts sent car mak­ers and sup­pli­ers higher.

The gains be­gan to fade around noon as oil prices and en­ergy com­pa­nies sagged. The losses ac­cel­er­ated af­ter the mid-af­ter­noon re­lease of the Fed­eral Re­serve’s “Beige Book” sur­vey of eco­nomic con­di­tions.

The Fed said eco­nomic growth con­tin­ued from mid-March into early April and pay im­proved for some work­ers. But in­vestors have been won­der­ing when ris­ing statis­tics like con­sumer con­fi­dence will start to turn into bet­ter pay and greater spend­ing.

“Show me where those num­bers are trans­lat­ing into some­thing more than just feel­ings,” said Brent Schutte, chief in­vest­ment strate­gist for North­west­ern Mu­tual Wealth Man­age­ment. “Peo­ple are look­ing for ev­i­dence that these con­fi­dence num­bers are trans­lat­ing into ac­tual ac­tions and the Beige Book showed that over the last cou­ple of months it’s been more of the same.”

The Stan­dard & Poor’s 500 in­dex fin­ished down 4.02 points, or 0.2 per­cent, at 2,338.17. It rose as much as 10 points, or 0.4 per­cent, ear­lier. The Dow lost 118.79 points, or 0.6 per­cent, to 20,404.49. Half of the bluechip in­dex’s losses came from IBM, which re­ported weaker-than-ex­pected sales in the first quar­ter.

The Nas­daq com­pos­ite rose 13.56 points, or 0.2 per­cent, to 5,863.03 as health care com­pa­nies climbed. And there were signs of op­ti­mism about the econ­omy, as well. The Rus­sell 2000 in­dex, which is made up of smaller com­pa­nies that tend to be more U.S.-fo­cused, added 5.24 points, or 0.4 per­cent, to 1,367.13 af­ter a late gain a day ago.

Oil prices slumped af­ter the En­ergy In­for­ma­tion Ad­min­is­tra­tion said U.S. crude in­ven­to­ries didn’t shrink as much as in­vestors hoped they would last week, and the EIA says the stock­piles are larger than nor­mal for this time of year. Bench­mark U.S. crude lost $1.97, or 3.8 per­cent, to $50.44 a bar­rel in New York. Brent crude, used to price in­ter­na­tional oils, fell $1.96, or 3.6 per­cent, to $52.93 per bar­rel in Lon­don.

All 34 en­ergy com­pa­nies on the S&P 500 fin­ished lower. Chevron dropped $1.45, or 1.4 per­cent, to $104.23 and Marathon Oil sank 68 cents, or 4.3 per­cent, to $15.06.

Schutte, of North­west­ern Mu­tual Wealth Man­age­ment, said faster wage growth will show up even­tu­ally even if monthly and quar­terly re­ports are un­even. As wages rise and peo­ple spend more money, he thinks the econ­omy will keep grow­ing.

“The con­sumer is in a very good place from a debt-to-as­set stand­point,” he said, af­ter re­duc­ing debt in re­cent years. “When they get wage in­creases, they’re more likely to spend those in the fu­ture than to save them.”

Tech­nol­ogy and con­sult­ing com­pany IBM slumped af­ter it re­ported $18.16 bil­lion in rev­enue in the first quar­ter, and ac­cord­ing to Fac­tSet, that was more than $200 mil­lion be­low an­a­lysts’ es­ti­mates. IBM stock fell $8.36, or 4.9 per­cent, to $161.69. It was the sec­ond day in a row that a weak re­port from a sin­gle com­pany pulled the Dow sharply lower, as Gold­man Sachs did the same on Tues­day.

Bond prices fell, re­vers­ing most of their gains from a day ear­lier. The yield on the 10-year Trea­sury note rose to 2.21 per­cent from 2.17 per­cent. That hurt high-div­i­dend pay­ers in­clud­ing util­i­ties and house­hold goods com­pa­nies. FirstEn­ergy shed 62 cents, or 2 per­cent, to $30.85 and beauty prod­ucts retailer Coty sur­ren­dered 42 cents, or 2.3 per­cent, to $17.99.

Gen­uine Parts raised its profit fore­cast for the year, although it ac­knowl­edged its U.S. busi­ness has been weak. Its stock jumped $1.77 per­cent, to 2 per­cent, to $91.91. Gen­uine Parts, along with car mak­ers, used car sell­ers, and re­tail­ers of auto parts and tires plunged ear­lier this month af­ter au­tomak­ers re­ported dis­ap­point­ing March sales. Some in­vestors felt that was a warn­ing sign about spend­ing by con­sumers.

Ro­botic surgery sys­tem maker In­tu­itive Sur­gi­cal climbed af­ter its profit and rev­enue came out ahead of an­a­lysts’ pro­jec­tions. The com­pany said ship­ments of its da Vinci de­vice and surg­eries per­formed with it both jumped. The stock rose $48.60, or 6.4 per­cent, to $807.95 and it helped health care com­pa­nies climb higher.

In other en­ergy trad­ing, whole­sale gaso­line fell 5 cents, or 3 per­cent, to $1.66 a gal­lon. Heat­ing oil lost 4 cents, or 2.5 per­cent, to $1.58 a gal­lon. Nat­u­ral gas rose 4 cents to $3.19 per 1,000 cu­bic feet.

The price of gold, which has climbed steadily in re­cent weeks, fell $10.70 to $1,283.40 an ounce. Sil­ver lost 11 cents to $18.16 an ounce. Cop­per added 1 cent to $2.53 a pound.

The dol­lar rose to 108.70 yen from 108.42 yen. The euro edged down to $1.0721 from $1.0730.

Bri­tish stocks con­tin­ued to fall. The FTSE 100 slid 0.5 per­cent af­ter a 2.5-per­cent plunge on Tues­day. Other ma­jor Euro­pean in­dexes re­cov­ered mod­estly. In France the CAC-40 gained 0.3 per­cent and Ger­many’s DAX edged up 0.1 per­cent. In Ja­pan the Nikkei 225 edged up 0.1 per­cent and the South Korean Kospi shed 0.5 per­cent. Hong Kong’s Hang Seng in­dex fell 0.4 per­cent.


Spe­cial­ist An­thony Ri­naldi is re­flected in a screen at his post on the floor of the New York Stock Ex­change Wed­nes­day.

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