While you were sleeping: Stocks drop on outlook woes

While you were sleeping: Stocks drop on outlook woes

(BusinessDesk) April 15 - Equities on Wall Street slid amid an unexpected climb in jobless claims while stocks in Europe declined amid renewed concern about the region’s debt crisis.

U.S. initial jobless claims unexpectedly increased in the latest week, climbing back above 400,000. Exacerbating concerns was an larger-than-anticipated rise in the core U.S. Producer Price Index in March.

In early afternoon trading on Wall Street, the Dow Jones Industrial Average fell 0.16%, the Standard & Poor’s 500 Index declined 0.26% and the Nasdaq Composite Index dropped 0.56%.

Also weighing on the market was a decline in Goldman Sachs after a report from a Senate subcommittee, released late on Wednesday, said the investment bank had sold mortgage-linked derivatives to clients at inflated prices and misrepresented the nature of the deals.

"This is a shot across the bow for Goldman, and this certainly won't be the last you'll see of headlines related to this," Michael Mullaney, a portfolio manager who helps manage US$9.5 billion at Fiduciary Trust Co. in Boston, told Reuters. "This could stay in the forefront for the next several months and we'll see additional ramifications in the stock."

Other decliners included Ford Motor Co. The car maker agreed to expand a recall of the best-selling F-150 pickup trucks. U.S. safety regulators said the recall was due to a possible short circuit that could cause airbags to deploy unexpectedly.

Among companies reporting earnings today is Google, which is expected to report a 25% increase in revenue after the market's close.

There was good news. Zipcar Inc jumped 66% in its first day of trading on the Nasdaq, after the initial public offering raised US$174.3 million on Wednesday.

The company is the leader in so-called car-sharing, a service that allows people to rent cars at an hourly or daily rate and park in convenient reserved spots.

"This interest in a green, socially responsible company underpinned by a high growth prospect is driving investor demand here," Josef Schuster, founder of Chicago-based IPO investment firm IPOX Schuster LLC, told Reuters. "It was a very well-marketed deal... It's a unique story and for the time being it's attractive."

Further optimism came from MKM Partners LP which said, according to Bloomberg News, that investors should buy bullish U.S. stock options because the VIX, or Chicago Board Exchange Volatility Index, falling below 20 indicates that equities are poised to rally to multiyear highs.

Today, the VIX fell 2.4% to 16.51.

Jim Strugger, a derivatives strategist at MKM, recommended buying May US$133 call options on the SPDR S&P 500 exchange-traded fund while selling twice as many May US$137 calls in a strategy known as a ratio call spread, which cuts the trade’s cost while capping potential profit.

“The 20 level for VIX represents an important risk threshold,” Strugger wrote in a note yesterday. “Above 20, we turn incrementally more cautious, anticipating escalation toward a volatility peak. On the other hand, we interpret a decline below that level as the beginning of a troughing phase that is coincident with a period of equity outperformance.”

In Europe, the Stoxx 600 Index and the euro declined on speculation Greece and possibly Ireland might have to restructure their debts.

The euro was last down 0.4% to US$1.4388 and 1% lower to 119.72 yen. The Stoxx 600 Index ended the day with a 0.5% drop.

Later on Thursday, International Monetary Fund first deputy managing director John Lipsky told Reuters Insider that Greece was implementing a reform program tied to its bailout and that the program did not contemplate any debt restructuring.

"The Greek authorities have committed to a program that we think will succeed and does not contemplate debt restructuring," Lipsky said.

The greenback slid 0.37% against a basket of major currencies.

(BusinessDesk)

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