EQUITIES COLAPASE AS SECTORS THAT BROUGHT HOPE RALLY HIT BY POOR EMPLOYMENT DATA, COLLAPSE IN CRUDE PRICES.
US equities staged a strong retreat on Wednesday as a worse than expected ADP employment report and a 10 % drop in crude prices due to a bearish inventory report reignited recession & economic concerns. Today's drop wiped out nearly all the gains which have been put in since the beginning of 2009. Technology & Industrial stocks were hit today on profit warnings from Alcoa & Intel. This comes on the back of Alcoa's announcement on Tuesday of plans to eliminate 13000 jobs. The company will kick off earnings reports next week. Energy stocks were hit after the weekly EIA inventory report showed a build in crude & gasoline inventories that far surpassed estimates. The dramatic fall in energy prices reignited talk of oil possibly retesting the $ 30.00 levels which were reached in December, as consumption remains several percentage points below the levels of this time last year.
The ADP employment report showed payroll shrinkage of 693,000 jobs, the largest number of losses registered since the measure began in 2001. This spurred a negative domino effect as companies that are tied to discretionary spending came under pressure. Time Warner dropped nearly 7% as the company will report its first annual loss in six years. One surprising gainer was General Motors, which gained nearly 5% on reports that the company will receive $13.5 billion from the TARP program. GM stated that the government loans it has received will be enough to carry the company through its worse case scenarios regarding auto sales.
Technically, Dow futures appear to have residual downward momentum that should the significant support level of 8600. Market should hold above this level, with a potential rebound back to resistance level of 8780
March Dow futures settled at 8744, down 206. March S&P futures settled at 905.20, down 25.30. March NASDAQ futures 1239.50, down 31.50.