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Midday Market Update

U.S. Stocks Follow Global Markets Lower

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U.S. Market    
Stocks followed global markets lower this morning after disappointing Chinese economic data and worries of Fed tightening.

China’s manufacturing sector contracted in May according to the HSBC’s flash purchasing manager index. The reading of 49.6 was the lowest in seven months and stoked fears that China’s growth was poised to slow considerably.

Initial unemployment claims fell a larger-than-expected 23,000 to 340,000 last week. The less volatile four-week moving average declined by 500 claims to 339,500. Claims are close to the lowest level in five years.

New home sales rose by 2.3% to 454,000 in April, above the 426,000 sales that were expected. The median price of new homes rose 14.9% to an all-time high of $271,600. Separately, the FHFA said that home prices rose 1.3% in March.

At midday the DowNasdaq and S&P 500  were down 0.1%, 0.3% and 0.4% respectively.

Stocks on the Move
Share of  Hewlett-Packard (HPQ) soared over 14% after the firm  reported second-quarter results late Wednesday. HP's revenue fell 10% from the year-ago quarter, to $27.6 billion, as sales declined across its four key businesses. PC and printer-related revenue fell 12% year over year to $13.7 billion. Enterprise service revenue grew 1% sequentially, to $6 billion, while segment operating margin improved to 2.6% on better cost control and account management. Revenue for the enterprise group, which consists of servers, storage, networking, and related maintenance services, fell 10% from the year-ago quarter, to $6.8 billion.

 Advance Auto Parts (AAP) reported  soft first-quarter results due to ongoing weakness in vehicle maintenance spending. Despite a 3% same-store sales decline, revenue increased 3% to $2.0 billion, thanks to the net addition of 287 stores over the past year (including the 124 acquired BWP outlets). Because of the sales deleverage and increased expenses from integrating the (currently) lower-margin BWP outlets, operating margins fell 140 basis points to 10.1%, and diluted earnings per share declined 9% to $1.65.

Foreign Markets
Japanese stocks plummeted today after weak Chinese data. The Nikkei 225 was down 7.3%. Other Asian markets also fell, with the Hang Seng shedding 2.5% and the Shanghai Composite dropping 1.2%.

European markets were also sharply lower on the day. In late trading, the FTSE 100, Paris CAC and Germany’s DAX were down 1.9%, 2.0% and 2.1% respectively.

Jeremy Glaser does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.