Global stocks and crude oil fell on Thursday after a slower-than-expected expansion in the U.S. economy’s service sector and weak retail sales damped optimism a day before a highly anticipated labor market report for April.
Stocks turned lower, government debt pared losses and the U.S. dollar trimmed gains against the yen after the Institute for Supply Management said its services sector index fell to 53.5 in April from 56.0 the month before. The report missed economists’ forecasts for a reading of 55.5, according to a Reuters survey. A reading above 50 indicates expansion in the sector. But the number of Americans filing new claims for jobless aid fell more than expected last week, easing fears the U.S. labor market recovery was stalling. Initial claims for state unemployment benefits dropped 27,000 to a seasonally adjusted 365,000, the Labor Department said. “The April (ISM) number shows we’re entering a soft period here for services. On the employment component, we saw a good jobless claims number this morning showing employment conditions overall are looking better so I wouldn’t worry too much about the ISM employment index showing less growth,” said Gary Thayer, chief macro strategist at Wells Fargo Advisors in St. Louis. Wall Street moved lower on the ISM report after hovering near break-even after the open. Weakness in retail sales data also weighed on U.S. stock indexes. According to Thomson Reuters data, 52.9 percent of retailers missed monthly same-store sales expectations for April. Costco Wholesale Corp’s (COST.O) April sales missed estimates, sending shares down 2.2 percent to $84.71. The Dow Jones industrial average was down 35.26 points, or 0.27 percent, at 13,233.31. The Standard & Poor’s 500 Index was down 6.25 points, or 0.45 percent, at 1,396.06. The Nasdaq Composite Index was down 26.05 points, or 0.85 percent, at 3,033.80. In Europe, the FTSEurofirst 300 index of top regional shares closed up 0.1 percent at 1,044.39 in choppy trading. MSCI’s all-country world equity index .MIWD00000PUS retreated, falling 0.4 percent to 327.02. The euro rose against the yen and rallied from two-week lows versus the U.S. dollar to trade little changed after European Central Bank chief Mario Draghi gave a more upbeat assessment of the than expected, reducing expectations for further monetary easing. Draghi, in comments after the ECB kept rates unchanged at 1 percent, said the euro zone’s economy was likely to recover this year, although the outlook remained vulnerable to downside risks. He added that inflation was likely to remain above 2 percent this year. The U.S. dollar index .DXY up 0.12 percent at 79.225 while the euro was down 0.06 percent at $1.3147. But gains in the euro could be short-lived ahead of elections in and Greece at the weekend. Oil slipped under $117 a barrel after OPEC said it had opened the taps more to weaken prices. Oil prices dropped after OPEC said it was unhappy with high prices and disappointing data helped paint a gloomy outlook for the world economy, reviving concerns about a drop in demand. Brent crude for June delivery fell $1.90 to $116.30 a barrel. U.S. crude fell $2.33 to $102.89 a barrel. Government debt pared losses to trade near break-even. The benchmark 10-year U.S. Treasury note was up 1/32 in price to yield 1.92 percent. The 30-year U.S. Treasury bond was up 3/32 in price to yield 3.11 percent.
