Evening Market Update

Stocks Slide, Close at Low For The Year

Equities closed at session lows, erasing early gains, as traders continue to take the “glass half-empty” view after Friday’s weak jobs report added to concerns about a slowdown in the global economic recovery, sending Treasuries higher. Company news was relatively light, with Bristol–Meyers Squibb Co and Celgene Corp announcing positive cancer drug research, while Apple Inc unveiled a new iPhone to little reaction and said it had already sold 2 million iPads, and Sprint Nextel Corp announced a record launch for a 4G phone. In M&A news, Talecris Biotherapeutics Holdings Corp agreed to be acquired, and Marsh & McLennan announced the sale of its Kroll corporate-intelligence unit. The sole US report in economic news was consumer credit, which unexpectedly rose, while the prior month was revised down.

The Dow Jones Industrial Average lost 115 points (1.2%) to close at 9,816, the S&P 500 Index fell 14 points (1.4%) to finish at 1,050, and the Nasdaq Composite dropped 45 points (2.0%) to 2,174. In modest volume, 1.4 billion shares were traded on the NYSE and 2.2 billion shares were traded on the Nasdaq. Crude oil lost $0.07 to $71.44 per barrel, wholesale gasoline fell $0.01 to $1.99 per gallon, and the Bloomberg gold spot price gained $21.15 to $1,241.05 per ounce. Elsewhere, the Dollar Index—a comparison of the US dollar to six major world currencies—rose 0.3% to 88.50.

The annual meeting of the American Society of Clinical Oncology (ASCO) was held over the weekend, where Bristol-Meyers Squibb Co. (BMY $24) announced an experimental drug extended survival in patients with advanced melanoma, a deadly form of skin cancer. BMY plans to file an application later this year with the US Food and Drug Administration for approval. Elsewhere, Celgene Corp (CELG $54) announced positive research from late-stage studies on its Revlimid treatment for lymphoma and multiple myeloma at the ASCO meeting. Shares of BMY and CELG were higher.

As widely anticipated, Apple Inc (AAPL $251) unveiled the iPhone 4 at the Apple Developer Conference today, with CEO Steve Jobs noting over 100 new features, including a new thinner design, a front-facing camera that can be used for video calling, called FaceTime, enhanced battery life and an antenna positioned around the edges of the phone. Jobs said that 2 million iPads have been sold to-date, with about 35 million apps downloaded. The iPhone 4, starting at $199 with a 2-year contract, will go on sale in five countries including the US on June 24, and will be in 88 countries by the end of September. Shares showed little reaction, as many of the new features were either previously leaked or rumored, and AAPL followed the general market lower for the day.

Sprint Nextel Corp. (S $5) announced that its sales on Friday of its 4G phone named EVO, which is made by HTC Corp. (HTCXF $43), marked the largest quantity of a single phone sold in one day ever for Sprint. The company said the record pace of sales led to temporary shortages of the device at some of its sales locations across the US. S gave up an early gain and was lower.

In M&A news, US firm Talecris Biotherapeutics Holdings Corp. (TLCR $16) surged after it announced the signing of a definitive agreement to be acquired by Spain’s Grifols SA (GIFLY $9) for a combination of cash and GIFLY shares, for approximately $3.4 billion. The deal is expected to create a vertically integrated and diversified international plasma protein therapies company.

Marsh & McLennan Cos (MMC $ 21) announced the sale of its Kroll corporate security business to private equity firm Providence Equity’s Altegrity for $1.13 billion in an all-cash transaction. Altegrity’s CEO, Mike Cherkasky, was the former CEO of both Kroll and MMC. Marsh put the unit up for sale in February as part of a long-term strategy to focus on the Risk and Insurance Services and Consulting businesses. Shares of MMC were down modestly.

Consumer use of credit grows, Bernanke set to speak on prime time TV tonight

Released in the last hour of trading, consumer credit unexpectedly rose in April by $1.0 billion, compared to expectations of a $1.0 billion decline, while last month’s initially-reported $2.0 billion increase was revised to a $5.4 billion decline. Within the report, revolving debt, such as credit cards, fell $8.5 billion, while non-revolving debt such as auto and mobile-home loans rose by $9.4 billion. The Fed’s report doesn’t cover lending secured by residential real estate.

Treasuries were higher, with the yield on the 2-year note down 1 bp to 0.72%, the yield on the 10-year note lost 6 bps to 3.15%, and the 30-year bond yield declined 5 bps to 4.08%.

Federal Reserve Chairman Ben Bernanke will give an “open interview” tonight to ABC News Journalist Sam Donaldson at about 7:55 p.m. ET and will include audience Q&A. In light of the euro-area debt crisis, which was emerging as the FOMC conducted their most recent policy meeting, and the disappointing labor report on Friday, Bernanke’s comments may carry some added weight as traders try to determine if these developments will change the outlook for the economy and monetary policy.

Euro continues move lower, benefitting the German economy

In reaction to the Hungary Prime Minister’s comments on Friday that Hungary may be the latest nation to fall victim to suffocation of elevated debt levels, Hungary’s Economy Minister said that, while the previous government gave false data on the state of the budget, “Any comparison to countries with much higher credit default ratings than Hungary is unfortunate,” and that comments about this issue have been “exaggerated.” Hungary’s deficit was previously expected to widen to 4.1% of GDP this year, while government debt was anticipated to increase to 79% of GDP. While Hungary’s currency is the forint, the speculation about the holdings by euro-area banks of Hungarian debt has further weighed on the euro since last week’s comments.

The euro continued to move lower, hitting another four-year record low versus the US dollar in early trading, while Germany—Europe’s largest exporter and biggest economy – announced that factory orders unexpectedly rose, jumping 2.8% m/m in April, on top of March’s strong upwardly revised 5.1% increase and compared to the 0.4% decline that economists had expected. In other economic news in the region, the meeting of G20 nations over the weekend did not provide any major new developments on the euro-area debt crisis and the continuation of the global economic recovery, but noted that the global economic rebound faces “significant challenges.” Also, France said many of the G20 nations are in favor of a tax on banks and details could be revealed over the next few weeks, per CNBC. Meanwhile, Germany is discussing measures to rein the nation’s deficit, including measures to cut social welfare benefits, public sector job cuts, and tax hikes.

In Asia/Pacific economic news, Australia announced a solid increase in job advertisements for May, which followed a decline in April, while Taiwan’s consumer prices rose less than expected and its trade surplus expanded by more than anticipated.

Tomorrow’s economic calendar has no major releases in the US, while Japan will announce bank lending, money supply and the leading index, Germany and France will announce their trade balances for April, Germany will release industrial production, and Canada gives a report on housing starts.