NEW YORK (AP) – Stocks are dropping in early trading Thursday as telephone companies and utilities continue to drag major indexes lower.
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Also, inflation, which has been running below the Fed’s target level for four years, has shown signs of picking up as energy prices rebound from a drop at the start of the year.
On Wall Street, the Dow Jones industrial average plunged 91.22 points to 17,435.40, while the broader S&P 500 fell 7.59 points to 2,040.04. USA stocks were poised to open lower, with Dow futures shedding 0.4 percent to 17,415.00 and broader S&P 500 futures down 0.3 percent to 2,034.70. The Nasdaq composite fell 53 points, or 1.1 percent, to 4,686.
Industrials and health-care stocks led the downturn in the wake of suggestions in minutes of the last meeting of the Fed in April that it might raise interest rates at its next meeting in June.
“This week’s adjustment in Fed monetary policy expectations, or expectations of future interest rate hikes, helped US Treasury yields move higher”, said Eric Viloria, currency strategist at Wells Fargo in NY. “Clearly looking back a few days ago I think there’s a pretty strong sense among FOMC membership that the market was not putting gin a sufficient probability in June or July meeting”. Those stocks have outperformed the market this year in part due to their reliable dividends, but higher rates on bonds would diminish the appeal of those stocks to investors seeking income.
Fed officials have expressed concern in recent weeks and months that the economy is stuck in state where even historically low rates of growth can fuel higher inflation. Wal-Mart’s higher-than-expected quarterly profit gave some support to USA stocks and the beleaguered retail sector.
BUCKING THE TREND: Urban Outfitters jumped $3.03, or 12 percent, to $27.62 after reporting first-quarter sales that exceeded analyst forecasts.
Monsanto rose $3.42, or 3.5 percent, to $100.55 after German drug and chemicals company Bayer confirmed it has entered talks with the USA -based seed company. Financials, which tend to benefit in a rising rate environment, shed 0.9 percent after posting their best day in a month on Wednesday.
Japan’s benchmark Nikkei 225 index edged up 0.14 percent and the yen strengthened a bit against the USA dollar, possibly in a risk-off shift toward the safe-haven currency.
The meeting could expose a rift on issues ranging from currency to fiscal policies within the group of advanced economies.Continuing fears about supply outages in Canada and Nigeria bolstered crude oil even as the prospect of a US rate hike prompted some investors to take profits after recent gains.[O/R] USA crude added 1.3 percent to $48.78 a barrel, up 5.6 percent for the week, while Brent crude advanced 0.8 percent to $49.25, up almost 3 percent for the week. Brent crude, used to price worldwide oils, dropped 75 cents, or 1.5 percent, to $48.18 a barrel in London.
“The gap between what the Fed says and what the Fed does seems to be shrinking”, he said on traders’ increased expectations that the USA central bank could increase interest rates this summer. European travel and leisure stocks.SXTP fell 1.4 percent after EgyptAir jet carrying 66 passengers and crew from Paris to Cairo disappeared.
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CURRENCIES: The dollar strengthened to 110.21 yen from 109.94 yen and the euro rose to $1.1208 from $1.1203.
