Stocks tumbled for a second straight trading session on Tuesday. The dollar surged to an eight-year high against the Japanese Yen, and crude oil tumbled at the start of the four-day week.
First, the scoreboard:
- Dow: 17,996.23, -235.79, (-1.29%)
- S&P 500: 2,099.43, -26.63, (-1.25%)
- Nasdaq: 5,017.28, -72.08, (-1.42%)
And now, the top stories on Tuesday:
- In economic data, nondefense capital goods orders excluding aircraft jumped by 1.0%. Economists had expected an increase of just 0.3%. Total durable good orders including volatile aircraft orders fell 0.5%, in line with expectations. “April’s durable goods figures confirm that, following the earlier disruption caused by the unseasonably cold weather in the Northeast and the West Coast port dispute, the factory sector was getting back on track as spring approached,” Capital Economics’ Paul Ashworth wrote.
- Home prices rose more than expected in March, according to the latest S&P/Case-Shiller home price index. Prices rose 0.95% month-over-month (versus 0.9% expected,) and rose 5.04% year-over-year (versus 4.6% expected.) And, new home sales spiked in April, rising 6.8% month-over-month (versus 5.0% expected) to an annual rate of 517,000 (versus 505,000 expected.) In an email, Brean Capital’s Scott Buchta summed his thoughts on the housing data: “Although demand continues to outweigh supply in many areas, stagnant wage growth and tight credit windows will limit just how quickly home prices can recover from here and we expect it to take at least 2-3 more years of steady growth to return the markets to equilibrium.”
- Dallas Fed Manufacturing fell more than expected in April, to the lowest reading since June 2009. The composite index came in at -20.8 (versus expectations for -11.5) following a drop of -16 in April. “We don’t feel confidence anywhere, but we are feeling cost pressures,” said one of the respondents in the survey. The oil crash was again a central theme among survey respondents. Some noted that although oil prices are recovering, their businesses are still feeling the pinch of the crash. Another respondent said wage pressures are building, as employees have left for competitors.
- Consumer confidence unexpectedly improved in May, rising 95.4 from 94.3 in April. Economists had expected a rise to 95.0. April’s number was revised down from an earlier print of 95.2. “After a three-month slide, the Present Situation Index increased, propelled by a more positive assessment of the labour market,” the Conference Board’s Lynn Franco said.
- The US dollar index jumped 1% to as high as 97.46, the most in a month. The dollar rose to an eight-year peak against the Japanese yen — as high as 123.33 — while the euro fell to a one-month low of around $US1.0863.
- Charter Communications is buying Time Warner Cable for over $US55 billion. The agreement values each Time Warner share at $US195.71 — 14% more than the closing price on Friday. The deal values Time Warner at $US78.7 billion. Time Warner Cable shares rallied by as much as 7%; Charter shares were up by more than 2% in late trading. As Business Insider’s Tim Stenovec writes, the deal is all about broadband: More Americans are cutting the cord in favour of streaming services like Netflix, and broadband internet is a market the ‘New Charter’ can capitalise on.
- West Texas Intermediate crude oil fell more than 2% to a one-month low of $US57.72 per barrel. Brent crude, the international benchmark, fell about 2.5% to as low as $US63.30 per barrel.
- According to Goldman Sachs, last week’s oil rig count drop by just one signalled a shift for the energy industry. Data from oil driller Baker Hughes showed the slowest drop in the 24-week streak of declines. “We believe that should West Texas Intermediate crude oil prices remain near $US60/bbl, US producers will ramp up activity given improved returns with costs down by at least 20%,” the Goldman analysts wrote in a note published Friday. “Last week’s rig count is a first sign of this response and suggests that producers are increasingly comfortable at the current costs/revenue/funding mix.”
- Shake Shack shares tumbled by more than 8% to end six straight trading sessions of gains. The stock is up 85% from its January IPO, gaining momentum after the impressive first-quarter results released earlier in May.
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