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Stocks End Lower in Selloff as Silver, Oil Slide

Wednesday, 4 May 2011 | 4:59 PM ET

Stocks closed broadly lower Wednesday amid sliding prices for precious metals and oil, and news of weakness in the U.S. economy.

The Dow Jones Industrial Average fell 83.93 points, or 0.7 percent, to close at 12,723.58, after edging into positive territory by less than a pointat the end of a choppy session on Tuesday.

Among Dow components, Caterpillar, DuPont and General Electric fell, while Intel gained.

The S&P 500 fell 9.30 points, or 0.7 percent, to close at 1,347.32, while the Nasdaq fell 13.39 points, or 0.5 percent, to close at 2,828.23. The CBOE Volatility Index, widely considered the best gauge of fear in the market,rose above 17.

Most key S&P 500 sectors sank, led by materials, energy and industrials.

Commodity prices fell amid concerns of an economic slowdown in India, China and the U.S., on news of weakness in the service sector and jobs.

Silver futures plunged below $40 an ounce, taking a breather from its rally in the last few weeks. Silver futures had skidded nearly 8 percent on Tuesday, as increased costs for trading futures pushed investors from the market. Goldfutures fell more than 1.5 percent, dropping to below $1,515 an ounce.

The dollar hit a three-year low against a basket of currencies, as the euro gained to nearly $1.50.

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Andoil continued to trade lower. London Brent crude fell 1 percent to close at $121.19, while U.S. light crude fell 1.63 percent to $109.24.

Most oil giants declined across the board, including ExxonMobil , ConocoPhillips and Chevron .

The market is likely to be choppy in May through July, as it has been in past summers, but stocks should turn higher again before the end of the year, Jordan Kotick, global head of technical strategy at Barclays Capital, said on CNBC.

"We’re at the highs for the last couple years. This is like the commodity markets, warning us that the market is going to step back for a bit, reassess," Kotick said. "That should give risk a reason to fade into May, June and July."

News that theservice sector slowedin April triggered the broad downdraft in the market, which had hit multi-year highs in April, said Marc Pado, U.S. market strategist and technical analyst at Cantor Fitzgerald.

"We had seen the pendulum swing since Monday in favor of the bears," Pado said. The weak data, including a slowdown in private sector jobs growth, provided "a nudge in the direction we were already going."

Long-term investors weren't all shaken by the day's downdraft. "The long-term trends in the markets are still favorable, still going up," said Mebane Faber, cofounder and portfolio manager at Cambria Investment Management.

Cambria runs an actively traded exchange-traded fund that invests in U.S. and global stocks as well as currencies, commodities, bonds and real estate. The fund is fully invested across all asset classes, although it is short the dollar in favor of foreign currencies, and has a "half weighting," in financials, because the long-term trends point lower.

The portfolio also continues to have a long-term investment in precious metals and energy, although they have scaled back in base metals and agriculture, Faber said.

In market news, Renren surged more than 40 percent on its first day of trading. The Chinese social network firm was priced at $14 a share, at the high end of expectations, before the market opened.

On the tech front, Apple traded flat. Before 11 a.m. ET, a single trade of 100 shares, executed at a sharply lower price, was cancelled,BATS Exchange confirmed.

And Intel gained after the company said itredesigned the electronic switches on its chips, known as transistors, to allow it to make the switches cheaper and faster.

In M&A, Ralcorp Holdings surged to new highs after news ConAgra Foodsproposed to buy the Post brand cereals makerand other food products for $4.9 billion in cash. ConAgra, which owns Dennison’s and Swiss Miss brands as well as commercial food products, also gained.

And Varian Semiconductor Equipment skyrocketed after news Applied Materials is buying the smartphone and solar equipment maker for $63 a share in cash.

The M&A activity failed to lift the semiconductor sector, however, as more than 50 percent of semiconductor stocks slid. The iShares PHLX Semiconductor Sector Index Fund slipped.

Among the day's earnings, Kellogg fell after the cereal producer's earnings fell shy of expectations, while Time Warner slipped even after the entertainment conglomerate delivered better-than-expected results, thanks to a boost in advertising sales at the entertainment company's cable TV networks.

Meanwhile, Comcastand CBS traded higher after both media giants reported a rise in profit. CNBC is 51 percent owned by Comcast. Meanwhile, at least four brokerages raised their price targets on CBS.

fell even after the world's biggest brewer reported higher revenue and profitthanks to higher prices.

Electronic Arts , Transocean and Whole Foods are among companies scheduled to release earnings after-the-bell tonight.

GM was slated to post earnings before-the-bell Thursday.

April retail sales trends were mixed as signs emerged that rising gas prices were beginning to effect consumer behavior, according to the SpendingPulse report from Mastercard Advisors. Apparel sales rose 10.4 percent in April from a year ago, while e-commerce spending surged 19.2 percent last month from a year earlier.

More news on retail sales is expected when chain-store sales for April are releasedon Thursday. Analysts expect sales will show a boost Easter's late date.

Also on the IPO front, Dunkin Brands, owner of Dunkin Donuts and Baskin & Robbins, filed to launch an IPO of up to $400 millionon the Nasdaq Global Select Market under the symbol "DNKN."

Commodity trader Glencore set a price range of 480-580 pence per share for its initial public offering. The first day of trading in London will be May 19. The price range values the company at around $61 billion at the mid-point of the range.

Volume on the consolidated tape of the New York Stock Exchange was 4.5 billion shares, whlie 1.1 billion changed hands on the NYSE floor.

In the day's economic news, the Institute for Supply Management's non-manufacturing index fell to 52.8 in April from 57.3 in March. Economists surveyed by Reuters expected the index to remain essentially flat at 57.4.

The ADP Employment Reportshowed a gain of 179,000 jobs in April, down from a revised gain of 207,000 in March. The March gain was previously reported as 201,000. Economists surveyed by Reuters had expected a gain of 200,000.

And according to another reading of employment, Challenger, Gray & Christmas said employers planned to fire 12 percent fewer employees in April than they did in March, 5 percent fewer than a year ago. The number of job cuts at 36,490 is the lowest total of the year.

Investors are awaiting a key government labor market report due Friday, which is expected to show a rise in overall nonfarm payrolls of 186,000 in April and a gain of 200,000 in private payrolls, according to a Reuters survey.

Falling interest rates spurred a pickup in mortgage loan activity. The Mortgage Bankers Association's weekly index of mortgage loan and refinancing activity rose 4 percent in the week ended April 29.

In Europe, Portuguese bond yields fell afterPortugal agreed a three-year 78-billion-euro ($116 billion) bailoutwith the EU and IMF.

European shares closed at a two-week low, as mining company stocks fell. The ECB meets Thursday, and is expected to keep rates on hold. The ECB raised rates in April.

On Tap This Week:

WEDNESDAY: Earnings after-the-bell from Electronic Arts, MetLife, News Corp, Transocean and Whole Foods.
THURSDAY: Bank of England rate announcement, European Central Bank announcement, chain store sales, jobless claims, productivity and costs, Treasury STRIPS, money supply; Fed Chairman Bernanke speaks, Fed's Kocherlakota speaks, UPS shareholder meeting, Verizon shareholder meeting; earnings before-the-bell from GM, Cigna, CVS Caremark and after-the-bell from AIG, Kraft and Visa.
FRIDAY: Non-farm payroll report, consumer credit, Alcoa shareholder meeting, flash crash anniversary; earnings before-the-bell from Constellation Energy and tentatively after-the-bell from Berkshire Hathaway.

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GE
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GM
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