Wall Street ceded ground today, as renewed fears about the Greek economy and caution ahead of this evening's FOMC minutes weighed on stock markets.
Unverified rumours that Germany wants Greece to pay higher than expected rates on emergency loans and separate reports that Greece is trying to sidestep IMF involvement in a rescue package left stock markets vulnerable to selling pressures today.
Caution ahead of the FOMC minutes for March, due later today, also weighed on risk appetite. The minutes are likely to focus on the quantitative easing programme, which expired at the end of March, and to provide insight into the Fed's next move – this is creating some uncertainty in the market at the moment.
Certain investors are also speculating that a period of stock market consolidation is just around the corner given that the S&P 500 rallied over 75% since March last year. Stock market fundamentals are also looking stretched, with the S&P 500 Index now trading at around 19 times reported operating profits, the highest PE ratio this year.
'There was a considerable gain yesterday carried from the employment data Friday and a couple other economic data points,' said Stanley Nabi, vice chairman of Silvercrest Asset Management Group. 'However, there are still a couple of minor disturbing things here that tell me that the market is entering a period of consolidation - the number of highs reached in the market has been shrinking, volume remains muted.'
The Dow Jones Industrial Average was trading 24.19 points (-0.22) lower at 10949.36 by 3.50pm (London time). At the same time, the broader S&P 500 Index fell 0.91 points (-0.08%) to 1186.53 while the technology-based Nasdaq 100 Index declined 5.41 points (-0.27%) to 1972.42.
Massey Energy was among the companies that dominated the headlines today. Its shares tumbled 9.2% $49 after an explosion at its West Virginia coal mine killed 25 workers. Also in the red was IT management software company CA Inc, which fell 3.4% to $23.03 after lowering its annual earnings-per-share forecast.
House builders were also in negative territory this afternoon, with KB Home down 2.8% to $16.51 after Credit Suisse downgraded the company's stock from 'outperform' to 'neutral', saying it expects a slowdown in the company's sales once the homebuyer tax credit expires.
This report knocked Pulte Homes 2.8% lower to 11.12. In addition, Lennar Corp retreated 1% to $17.37 and D.R. Horton declined 1.9% to $12.35.
Elsewhere, Toyota's shares slid 0.30% to $81.04, after being accused of 'knowingly' hiding its pedal defect from the US government.
In technology news, investors digested Apple's iPad sales figures, which sold around 300,000 units in its first day of trading. Although this was ahead of the number of iPhones sold on the first day, it was under the median of a wide range of forecasts. Apple's shares were practically unchanged at $238.55 this afternoon.
Meanwhile, shares of chip makers Intel and Advanced Micro Devices struggled despite buy recommendations from Broadpoint analysts. 'As we preview our PC names, we expect solid beat and raise results for Intel and Advanced Micro Devices (AMD) as we continue to believe current year 2010 demand remains underestimated,' Broadpoint said in a note yesterday. 'While we are 'Buy' rated on both names, we are slightly favouring Intel into the print, as AMD's Product Company cash flow could run the risk of not supporting current valuations. However, we expect a material increase in earnings and cash flow in the second half of 2010 that should support our $14 AMD Price Target.' The brokerage reiterated its 'Buy' on both stocks and provided Intel with a $29 share price target.
Intel's shares traded around 0.8% lower at $22.41 while AMD's shares fell 2.3% to $9.31.
Bucking the negative trend was Peabody Energy, which rose nearly 1% to $46.45 after raising its takeover offer for Macarthur Coal.
