Stocks Slumped, Logging Worst May Performance since 2010

Published on Thursday, 31 May 2012 18:08 Written by Christopher Lynn

New York, May 31^st (TradersHuddle.com) – Stocks fell amid lackluster economic data in the U.S., ongoing fears over the spiraling crisis in Spain, and increasing signs of slower global growth. Demand for safe haven assets continued, with the Dollar strengthening against the euro and the 10-year Treasury yield hitting new record lows. Major benchmark indices logged their worst May performance since 2010.

The Dow Jones Industrial Average lost 25.73 points, or 0.21%. The S&P 500 index slid 2.93 points, or 0.22%, while the NASDAQ dropped 10.02 points, or 0.35%.

For the month, the Dow and the S&P 500 slumped more than 6%, while the NASDAQ tumbled close to 7%.

The market started near the flat line as futures gave up earlier gains following lackluster economic data, which mostly came below expectations. The ADP report showed that private employers added 133,000 jobs in May, disappointing investors who were expecting a gain of 155,000. Meanwhile first quarter GDP was revised lower to 1.9% from a prior reading of 2.2%.

National chain retailers reported same store figures for May, with the majority reporting better than expected data. But adding to the lackluster economic data, Business activity in the Midwest slipped to 52.7 in May from 56.2 in April.

However, stocks cut their losses following a report that the IMF was in talks to provide a rescue loan to Spain. This report was later denied, with the IMF saying that the annual economic talks between the IMF and Spanish authorities will take place next week.

Facebook (NASDAQ: FB) saw another volatile day of trading. The stock broke below the $27 handle, logging a new low of $26.83 to then sharply rebound to settle with a 5% at $29.60. Separately, S&P Capital IQ cut its target price on the stock to $27 from $30.

Most of the S&P 500 sectors closed lower, with energy leading the decliners, followed by healthcare and technology. Financials and utilities were the only sectors in the green. Energy slumped as crude oil prices continued with their slide, dropping below $87 per share amid signs of slower global growth, a stronger Dollar, and inventory data.

Tesoro (NYSE: TSO) logged the biggest decline in the energy sector, with shares slumping 4.7%; while Chesapeake Energy (NYSE: CHK) jumped to the top of the sector, with shares adding nearly 3% following a report from Bloomberg speculating the company could be an attractive takeover candidate at current valuation to energy giants Exxon Mobil (NYSE: XOM) or Chevron (NYSE: CVX). Exxon slid 1.5%, making it one of the biggest drags in the Dow Jones Industrial Average.

In the financial sector, Morgan Stanley (NYSE: MS) jumped 2% to $13.36, as its CEO James Gorman defended the bank’s performance on the Facebook IPO, saying the investors need to give shares a little time. Additionally, Morgan Stanley announced that it plans to move ahead and buy14% more of Smith Barney from Citigroup. Shares of Citigroup (NYSE: C) gained nearly 2%.

Meanwhile, Bank of America (NYSE: BAC) also jumped more than 2% to $7.35, moving away from its 200day moving average at the $7.18 area. Bank of America posted the biggest percentage gain in the blue chip index, despite the lackluster economic data.

Most of the retailers logged better than expected sales data for May. Target (NYSE: TGT) gained 0.21%, while TJX Companies (NYSE: TJX) jumped 2.73%. Meanwhile Costco (NASDAQ: COST) gained 0.8% on the session. The company said its sales for May climbed 4%, slightly below consensus of 4.4%. However, ex-gas sales jumped 6%.

In the industrial side, Joy Global (NYSE: JOY) tumbled more than 5% after beating earnings expectations but lowering its full year guidance below consensus. Rival Caterpillar (NYSE: CAT) slumped 2.8% to $87.62, logging the biggest decline in the blue chip index.

Technology was also weaker; Apple (NASDAQ: AAPL) slid 0.25% to $577.73, closing the month with a loss of less than 1%. First Solar (NASDAQ: FSLR) slumped more than 6%, logging a new multiyear low of $12.19, while Frontier Communications (NYSE: FTR) jumped more than 4% to $3.74, posting the biggest gain in the sector.

Elsewhere on the M&A front, Talbots (NYSE: TLB) soared nearly 90% on news that private equity Sycamore Partners said it will acquire the women's clothing chain in a deal worth about $193 million.

And U.S. Airways (NYSE: LCC) rallied more than 4% amid weak crude oil prices and on news that the airline might team up with TPG Capital to bid for bankrupt American Airlines parent AMR.