Chinese stocks suffered their worst one-day drop in months overnight, weekly jobless claims rose more than expected, and US stocks fell for the second time in 3 days this week.
First, the scoreboard:
- Dow: 18,129.79, -33.20, (-0.18%)
- S&P 500: 2,121.84, -1.64, (-0.08%)
- Nasdaq: 5,098.81, -7.78, (-0.15%)
And now, the top stories on Thursday:
- Economic data was light ahead of the big revision of Q1 Gross Domestic Product tomorrow. Initial jobless claims rose slightly to 282,000 last week. Expectations were for claims to total 270,000, down from 274,000 the prior week. It was the 12th straight week that claims came in below 300,000. The 4-week moving average of claims rose by 5,000 to 271,500; last week, the average dropped to the lowest level in 15 years. In a note to clients, BNP Paribas’ Derek Lindsey wrote: “The trend in claims, below the pre-recession trough for weeks now, remains in line with our forecast for continued tightening in labour market slack ahead and with our expectation for another solid payrolls report next Friday.”
- The pending home sales index beat expectations and jumped to the highest level in nine years in April. According to the National Association of Realtors, sales rose 3.4% month-over-month to 112.4, and 13.4% year-over-year. Economists had forecast that sales, based on contracts for previously owned homes, rose 0.9% month-over-month, and 10.9% year-over-year. NAR chief economist Lawrence Yun wrote, “homeowners looking to sell this spring appear to be in the driver’s seat, as there are more buyers competing for a limited number of homes available for sale. As a result, home prices are up and accelerating in many markets.”
- Chinese stocks got smoked. The Shanghai Composite, which has surged 143% over the past year, had its worst day since January. The index closed down 6.5%, falling sharply after lunchtime. Investors sold off shares after more brokers tightened margin requirements, or terms of the use of borrowed money in trading, for their clients.
- US crude inventories fell for a fourth straight week. The Energy Information Administration’s weekly release showed that inventories fell by 2.8 million barrels in the week ended May 22, slightly faster than the drop by 2.7 million recorded in the prior week. There are now 479.4 million barrels in storage, maintaining an 80-year seasonal record. West Texas Intermediate crude oil prices traded below $US57 per barrel for most of the morning, but rebounded to as much as $US58.02 in the afternoon. Goldman Sachs identified $US60 per barrel as a sweet spot around which producers are comfortable with increasing supply again.
- Avago Technologies is acquiring Broadcom for $US37 billion in the largest ever merger between chip makers. It is a cash and stock deal, with Avago offering Broadcom shareholders $US17 billion in cash and $US20 billion of its own shares. Broadcom is one of the largest semiconductor companies in the world, and its clients include Samsung and Apple. Avago, based in California and Singapore, has made at least three acquisitions in the past 13 months. The deal is expected to close by the end of next April.
- GoPro shares jumped as much as 7% after CEO Nick Woodman said the company is developing a drone. “We see similarities to the viral growth of quads, similarly to early days of GoPro,” Woodman told CNBC. In addition, GoPro is creating a six-camera virtual-reality recording system. Shares have fallen about 11% year-to-date, and analysts pointed to growing pressure in the point-of-view camera space.
- Former Lehman Brothers CEO Dick Fuld made his first public speech since the company went bankrupt in September 2008. He gave the keynote address at the Marcum MicroCap Conference in Midtown Manhattan. “Regardless of what you heard about Lehman Brothers’ risk management, I had 27,000 risk managers because they all owned a piece of the firm,” he said. “I was blessed with a terrific team, for the most part. We were in it together,” he also said.