Evening Market Update

Economic Outlook Concerns Extend Losses

US equities added to their recent negative run, closing near the lows of the day, as traders contemplated the direction of the economic recovery with no major economic or equity news to act as a catalyst. The economic calendar was dormant and will remain light for the week, with Wednesday’s Federal Reserve’s Beige Book the main highlight of the docket. On the equity front, Apple kicked off its Worldwide Developers Conference with a yawn, while Progress Software warned of 2Q results that will be below forecasts. Treasuries ended mixed with losses coming at the longer end of the yield curve despite the declines in the equity markets.

The Dow Jones Industrial Average lost 61 points (0.5%) to 12,090, the S&P 500 Index declined 14 points (1.1%) to 1,286, and the Nasdaq Composite fell 30 points (1.1%) to 2,703. In moderate volume, 959 million shares were traded on the NYSE and 1.9 billion shares changed hands on the Nasdaq. WTI crude oil fell $1.21 to $99.01 per barrel, wholesale gasoline lost $0.04 to $2.95 per gallon, while the Bloomberg gold spot price gained $1.78 to $1,544.06 per ounce. Elsewhere, the Dollar Index—a comparison of the US dollar to six major world currencies—was 0.5% higher at 74.01.

Apple Inc. (AAPL $338) lost ground late in the day, paring gains that came before CEO Steve Jobs took the stage at the company’s Worldwide Developers Conference today in San Francisco. The elevated hype that usually precedes the event lost some of its luster as no new gadgets were unveiled at the conference, with the company instead focusing on the features of the latest version of its operating system, named Lion and available in July, and a new service called iCloud.

Progress Software Corp. (PRGS $23) finished over 11% lower after the software provider said 2Q EPS and revenues will be “slightly lower than guidance,” with revenue expected to be $134 million and earnings ex-items to be between $0.37-0.38 per share. The company said revenues fell short of projections due to performance within the enterprise data solutions business segment, and its results were also impacted by increased investments in its sales professional services unit. Analysts surveyed by Reuters were expecting the company to post revenues of $137 million and EPS of $0.42.

Fed data to highlight short weekly economic docket

The US  economic calendar was void of any major releases today, and Treasuries finished mixed but lower at the long end of the curve, with the yield on the 2-year note down 1 bp to 0.43%, the yield on the 10-year note 2 bps higher at 3.01%, and the 30-year bond rate advancing 4 bps to 4.26%.

The only major release on the US economic calendar this week is Wednesday’s midday  Federal Reserve Beige Book, wherein Fed staffers summarize anecdotal economic data from all twelve Federal Reserve districts in preparation for the next Federal Open Market Committee (FOMC) meeting scheduled for June 21-22. At the April meeting, the Fed downgraded its view on the economy, but noted that the slowdown and increase in inflation were expected to be transitory, or temporary.

Tomorrow’s US economic calendar will only offer consumer credit, forecast to rise by $5.0 billion in April following a $6.0 billion increase in March.

Sentiment in Europe sapped by continued euro-debt and global economic concerns

Eurozone debt concerns continued to stymie sentiment overseas, along with worries toward the global economic recovery. The debt concerns in the region came even after Friday’s announcement from Greece that austerity talks with European Union (EU) and International Monetary Fund (IMF) officials went “positively,” likely opening the door for a second bailout for the debt-laden nation. Also, fellow troubled nation Portugal found some pressure after the country’s Social Democrats defeated the ruling Socialists in elections over the weekend, boosting hopes that the nation can deliver its aggressive austerity measures that are required in the EU/IMF’s bailout package. On the economic front, a read on UK employment confidence improved, while eurozone producer prices came in hotter than economist projections for April, exacerbating inflation concerns ahead of Thursday’s policy meeting by the European Central Bank (ECB). Although the ECB is expected to keep its benchmark interest rate unchanged at 1.25%, traders will be paying close attention to ECB President Trichet’s comments at the press conference after the meeting, to see if he mentions a “strong vigilance” stance towards inflation that most ECB watchers see as a precursor to an imminent increase in rates. The Bank of England (BoE) is also expected to make its monetary policy announcement on Thursday, and is anticipated to keep its benchmark rate unchanged at 0.50%.

Trading in the Asia/Pacific region was light as markets in China, South Korea, and Taiwan were closed for holidays, while economic news was non-existent. However, for those markets open for business, sentiment was lackluster amid concerns over the health of the global economy. Markets in Japan were also pressured by a sharp drop in shares of Tokyo Electric Power Co. (TKECY $4) amid a report that Tokyo Stock Exchange (TSE) President Saito said the operator of the nuclear facility that was damaged by the March earthquake and tsunami and is at the heart of the nation’s nuclear crisis should be delisted, which fostered concerns about the company’s future. However, the TSE said the company does not currently meet requirements for its shares to be delisted, per Bloomberg. The pressure on the stock also came from a media report that suggested the utility company will report a net loss of nearly $7 billion, though TKECY said it was not the source of the information.

In economic news out of the US’ neighbor to the north, Canadian building permits fell 21.1% month-over-month (m/m) during April, nearly triple the 7.5% m/m decline expected by economists surveyed by Bloomberg, while the nation’s Ivey Purchasing Managers Index rose to 69.1 in May from 57.7 in April, well above the 60.0 reading expected by economists.

Tomorrow’s international economic calendar will also be fairly light, with the eurozone reporting retail sales, Germany releasing factory orders, while further east, Japan will provide its leading index and current account balance, and Australia offers data on home loans. In central bank action, the Reserve Bank of Australia will conclude its monetary policy meeting, where no change to its target cash rate of 4.75% is expected.